= ~ Ce 

y1 © 4 me ets # 
; ES a 

ee. , 

— i i 

ne.” se (i 


4 


Rinidard Accounting and Cost System 


_ FOR THE 


Electrical Manufacturing Industry 





. FOURTH EDITION 
October 1, 1922 


Mee Issued by the Electrical Manufacturers’ Council 








SSR REECE ONS Prt ae 4. Ee oS 
= - = < 





‘ 


+ 


oe on ag 
rye ae 


thik q angie 


} , i { 
“ey WAAC PM ky oe 
Ue ya 
So ey 





i as 
eal 


Mie 


enn 


a nt tA 





STANDARD ACCOUNTING AND COST SYSTEM 


FOR THE 


ELECTRICAL MANUFACTURING INDUSTRY 


APPROVED BY THE 
ELECTRICAL MANUFACTURERS’ COUNCIL 


APRIL 12, 1917 


APPROVED BY THE 


FEDERAL TRADE COMMISSION 


JANUARY 27, 1917 


FOURTH EDITION 
Revised October 1, 1922 


Issued by the Electrical Manufacturers’ Council 





Bee) yt age 


rit y Oi tite, 


Bis wth i inte at) 


hk 
en 
Test 
\ 
ae 
a 


/ an wx Ki 2 Ay 


i 


worry dear: sf 
rian! e Panel d Heb ayaa re 





| Standard Accounting and Cost System—Electrical Manufacturing Industry Table of 


24 TA 27 


FOURTH EDITION Contents 


LS 
EQ Ast. 








e 


. Aun “TABLE OF CONTENTS 
5 Introduction OOM 
> 


History of the movement 
Reports of the Committee 
Copy of Federal Trade Commission’s certificate of approval 


Section 1: General accounting system 


Balance sheet accounts, arrangement and titles 
Summary of financial operations, arrangement and titles of accounts 
Other controlling and intermediate accounts, explanations 


Section 2: General cost system 


Diagram of the elements of cost 

General suggestions as to applying this system 

Elements of cost 

Suggestions as to preparing cost estimates 

Determination and application of rates for depreciating manufacturing plant 


Section 3: Classification and definitions of controlling and intermediate accounts 


Index 
Section 4: Suggested method of applying this system 
Section 5: Suggested scrap accounting system 


Section 6: Suggested foundry accounting system 

















bal , { 7 ce aa 
i 


eA iy. ¥ { PE OR can ae F q 
PAP TR ao ae ae MS 4 ei! 
AL PP eiikibehe Sayer kc WN ere RA 
aS cyt Sigh UU hi hat) Gade ceekeraene bake tO Pros 
fe : oy ; Fs oe -_ y i u xy 
) k ‘ y ary. ue . wi se wea r a Ae 
wi , Lae pe 1h MUS hy Che PEROT Sey Tats. Na? 





\ 


ae va 
Wes | j OS a a ca ees heh ee 
% . misses Onifuro tapemee) re 
tr bs yi ? ha Z ‘ i va 
“ lit: hein deceit aOR tee, Ae oye 





» 4 ‘i. = 
‘y oA AR sR ot Ura Peay py 22RD ade hes ewe 


PY 


. ea PETA A Tey Bert ath 0d oe Spt eB Dey TeTaetihs ft Ki hey | FE Oe oN, Pike Ie 


— 


re vr By Y. 


ay | pete ts foo [eee et 


i f bit by ete? 
in 7) q i Sere i AC? Lith pee } res 
\ Ls Wald F ? Af ee 
; NAN) AP ALN RRR: Ge at eo a) CAR YS 
A , i’ i, 1 ay i * : , t \ 4 ” «| : bt | A ay 
SAE 7 f : RO da | th ERT Tey 
f | ‘ : ‘ i : b A ‘ a ; ¥ uri 
. 4 hay he iis Ny ek “dey dog anes) 
y ' ; ’ Ppa At a Boe rl ; Sig bes itt vy 
VERMA Soft i chy) phy fhe 4 f y) hate HO PO eS Wieeikele ied fe B pad 
} 
\ q 


cM D | | . % b * ri y ~ . 
‘ piviisiowg ote tbmoeradnt Gre york ote to sae ah hth oi Roeder: - 3 


si . ode ke 
i ' 


Aa | ner 


=! 
i 


re 


rohpee ainkh sabes to. bat! +h ate gna 


wi, : j 

are My Ale ; i i ‘ re 

aM, y } i 

=i) x i | a, abet penn Uo aaa te oa 

matinga wah muons inn 
i 

me sh URS by Seat ty 
Lae hs he riteys Seaudede yubainy} 
Anyi! Ven : y 8: r hy ; 







i cpptpeiberd peeup psp deena shpsennlnray mentnayns aes 
‘ iy The wl Laie £4 


} 
a 


Standard Accounting and Cost System—Electrical Manufacturing Industry Introduction 
| FOURTH EDITION Page 1 











A BRIEF HISTORY OF THE MOVEMENT FOR THE STANDARDIZATION 
OF ACCOUNTING AND COST METHODS 


For many years it has been evident that an agreement in theory and practice as to the 
fundamental principles of accounting and costs would be extremely beneficial to the companies 
engaged in the manufacture of electrical products. A number of previous attempts in this direc- 
tion had failed for various reasons, but in 1916 a new impetus toward uniformity was derived from 
the action of the Electrical Manufacturers’ Club in providing, in the programme of its spring 
meeting, for the discussion of the subject, and its request that the Electrical Manufacturers’ ~ 
Council, representing the three organizations into which the members of the industry are grouped, 
appoint a Committee to develop a standard system of accounting and costs. Contemporaneously, 
the Federal Trade Commission through its Chairman, the Hon. Edward N. Hurley, engaged in 
an educational campaign among the manufacturers of the country, pointing out the startling 
inadequacy of existing cost systems in nearly all branches of industry and urging that trade 
associations representing separate industries should endeavor to obtain uniform practice for the 
benefit of all. 


The three organizations, embracing 275 member companies, represented by the Electrical 
Manufacturers’ Council, are: 


The Electrical Manufacturers’ Club, 
The Electric Power Club, 
The Associated Manufacturers of Electrical Supplies. 


The Committee on the Standardization of Accounting and Costs, appointed by the Council, 
is chosen with reference to an adequate representation of all classes of manufacturers, large and 
_ small, simple and complex, eastern and western, etc. The companies represented are as follows: 


Allis-Chalmers Manufacturing Company, Milwaukee, Wis. (W. A. Thompson) 
American Wiremold Company, Hartford, Conn. (D. H. Murphy) 

Belden Manufacturing Company, Chicago, Ill. (J. C. Belden) 

Cutler-Hammer Manufacturing Company, Milwaukee, Wis. (H. F. Vogt) 

Electric Controller & Manufacturing Company, Cleveland, O. (H. F. Stratton) . 
General Electric Company, Schenectady, N. Y. (C. E. Patterson) 

Holtzer-Cabot Company, Boston, Mass. (W. S. Kemp) 

Johns-Pratt Company, Hartford, Conn. (A. W. Fox) 

Ohio Brass Company, Mansfield, O. (C. C. Beck) 

Robbins and Myers Company, Springfield, O. (H. E. Freeman) - 





Introduction Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 2 FOURTH EDITION 





Safety tnsitated Wire & Cable Company, New York, N. Y. (LeRoy Clark) 

Sangamo Electric Company, Springfield, Ill. (G. W. Good) 

Wagner Electric Manufacturing Company, St. Louis, Mo. (W. A. Layman) 
Western Electric Company, New York, N. Y. (R. H. Gregory) 

Westinghouse Electric & Manufacturing Company, Pittsburgh, Pa. (J. C. Bennett) 


This Committee has met as occasion required during the past five years. Its members 
have studied not only the general literature on the subject of accounting and cost methods, but 
the conditions and hazards peculiar to the highly technical and complex business in which they are 
engaged. In their efforts they have kept in touch with many companies not immediately repre- 
sented on the Committee and have also had the benefit of the constant counsel and co-operation 
of authorities in other industries and in the profession of higher accountancy. 


As a result of their efforts, the system which is printed in this pamphlet, has been developed. 
On January 27, 1917, the system was formally approved by the Federal Trade Commission, as 
shown in the letter from the Chairman, the Hon. Edward N. Hurley, printed on page 5. Since 
the first edition was issued, the Committee has made many improvements in detail, all of which 
are embodied in the fourth edition, which is now submitted, with increased confidence in its value. 


The Electrical Manufacturers’ Council, heartily recommends its general adoption not only 
by members of the Electrical Manufacturers’ Club, Electric Power Club, and Associated Manu-. 
facturers of Electrical Supplies, but by the entire electrical manufacturing industry. 


Copies may be secured by electrical manufacturers upon application to Frederic Nicholas, 
Executive Secretary of the Council, 30 East 42nd Street, New York, at the price fixed by the 
Council. 


The Council has also voted to continue the present Committee, as a standing Committee 
on uniform accounting and cost methods. All questions and suggestions regarding this system 
may be addressed to C. E. Patterson, 120 Broadway, New York. 


S. L. NicHoitson, Chairman, 
Electrical Manufacturers’ Council. 


| Standard Accounting and Cost System—Elecirical Manufacturing Industry Introduction 
FOURTH EDITION Page 3 





FIRST REPORT OF COMMITTEE 


(Submitted with preliminary issue) 


New York, April 5, 1917. 
Tue ELectricaL MANUFACTURERS’ COUNCIL. 
Gentlemen: 


Your Committee on the standardization of accounting and cost methods for the electrical 
manufacturing industry, submits the following report: 


For the convenience of Executives, your Committee has condensed in Sections 1 and 2, 
the general outlines of the accounting and cost systems. Obviously, however, the account head- 
ings must be defined and certain features of the routine elaborated, in order that there may be 
uniform interpretation on the part of accounting officers whose duty it is to carry out the system. 
These details will be found beginning with Section 3. 


The accounting and cost system, which is recommended for adoption by electrical manu- 
facturers, has been so planned that it not only conforms to the requirements of scientific account- 
ing and an adequate cost system, but is sufficiently flexible so that it may be used to advantage 
by both large and smal! manufacturers: 


(a) Small companies may use the condensed or group titles. 


(b) Moderate sized companies may use the intermediate headings as far as they consider them 
desirable; so, of course, may the smaller companies, if they choose to do so. 


(c) Large manufacturers may use the further subdivisions to the extent they may individ- 
ually regard as necessary. 


(d) The essential principles are, however, that: 


1. If the full detail be adopted, the items shall finally be condensible into the main 
group headings used by the smaller manufacturers. 


2. In any scheme of financial reports, either to the Federal Trade Commission, the 
United States Internal Revenue Department or to any electrical manufacturing or 
trade association, the information shali conform to this standardized plan, and the 
figures, when consolidated, shall be representative of the whole electrical manufac- 
turing industry. 


Throughout its work, your Committee has kept in touch with the Chairman of the 
Federal Trade Commission and his assistants. On January 23rd, it submitted its report to the 
Commission for examination. This report was referred, as we were informed by the Chairman, 
the Hon. Edward N. Hurley, to the consulting committee of certified public accountants which 
has aided the commission in its work, and, on January 27th, the system which we now present 

_ to the Electrical Manufacturers’ Council received formal approval by the Commission. 


Yours very truly, . 


C. E. Parrerson, Chairman. 





Introduction Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 4 FOURTH EDITION 





REPORT OF COMMITTEE 


’ (Submitted with fourth edition) 


New York, October 1, 1922 
THe ELEcTRICAL MANUFACTURERS’ COUNCIL. 


Gentlemen: 


Three editions of the Standard Accounting and Cost Manual have been published, with 
increasingly wide use among the electrical manufacturers of the country. This work has also 
been in demand in other countries. Copies have been filed in libraries and official repositories in 
London, Paris, Tokyo and other foreign cities and your committee has conducted considerable 
correspondence with similar organizations in England and elsewhere abroad. 


. We now submit, through the Council, the fourth edition of this manual, confident that it 
will prove to be the best which we have issued. 


At a fully attended meeting of the committee in July, at which we were aided by represent- 
atives of electrical manufacturing companies not included in the membership of the committee 
itself, the whole manual was most carefully reviewed. Although the changes involve no important 
principles, there are, nevertheless, modifications which we deemed to be well worth while. They 
consist of the following: 


1. Improvements in titles and definitions tending to make the Me sheet and Statement 
of financial operations clearer. 


2. Improvements in the methods of accounting for expenditures for development, special 
tools, etc., in order to make their absorption in costs of different lines of product more 
accurate. 


3. Suggestions in connection with use of normal overhead percentages or rates for absorbing 
factory indirect expenses into costs when the volume of production is either abnormal or 
subnormal. 


Inclusion of a section in the manual for accounting for the important item of scrap. 


Further refinements in the classification of general expenses between administration and 
distribution expenses, the latter representing the expense of marketing product after it 
leaves the factory. 


6. Revision and amplification of the supplementary manual (detailed methods of applying 
the system) which will be embodied as a section of the fourth edition. 


7. Inclusion in the manual of a section covering foundry routine, applicable to either iron, 
steel, malleable or brass foundries. 


The committee appreciates the valuable support which the Council has given its efforts to 
induce all manufacturers of electrical apparatus, devices and material to adopt standard practice 
in this exceedingly important matter of sound accounting and accurate costs. 


Yours very truly, 


C. E. Patrerson, Chairman. 





\ 
Standard Accounting and Cost System—Electrical Manufacturing Industry Introduction 


FOURTH EDITION Page 5 





Copy of Federal Trade Commission’s certificate of approval 


Edward N. Hurley 

Chairman FEDERAL TRADE COMMISSION 
William J. Harris 

Vice-Chairman 


eee Pees WASHINGTON 


George Rublee 





} January 27, 1917. 
Leonidas L. Bracken 
Secretary 


Mr. C. E. PATTERSON, 
c/o General Electric Company, 
Schenectady, N.Y. 
Dear Mr. Patterson: 


I have your letter of recent date and report of the cost accounting committee of the 
Electrical Manufacturers’ Club, the Electric Power Club and the Associated Manufacturers of 
Electrical Supplies, with the request that the system of accounts as devised by the Committee 
be examined and, if seen fit, endorsed by the Commission. 


I am glad to inform the Committee that we have carefully examined the cost accounting 
plan and classification of accounts as recommended by it, and consider that the methods of 
ascertaining costs in a uniform manner covering both large and small concerns in the electrical 
manufacturing industry have been very satisfactorily treated, and that the work of the Com- 
mittee throughout is in accordance with good accounting practice. The plan of the Committee, 
therefore, is approved. 


With best wishes for the success of the good work you have started, I am, 
Very truly yours, 


(Signed) Epwarp N. Hurvey, Chairman. 


ts ees * y bs “ii 


a anon 3 ant | 


i edits “ft % 


: 
ri 


neat) ae! 


gif! ‘ ae 44 Perper 

tern estonia vcd) Risk stage © gig oe 

+ he ehradoog WD ayn pci oe 
“orate mete tial, es (By ed aria 
ho henaal aecth (uieyinTt curing! it 


Pies ela Ee re arriesie pt at USS hy 


aeourcaned vane > eet 


, 
We 
hin ub oo 


: 
VALS 
ye vont remaererem annie 
it 





(FOURTH EDITION) 


STANDARD ACCOUNTING AND COST SYSTEM 
FOR THE 


ELECTRICAL MANUFACTURING INDUSTRY 


Section 1 


GENERAL ACCOUNTING SYSTEM 











i, i} Wee ay ‘ Bel ee Mery in tae 
iy Bure ices Nh A, eb ate EL Ba tas ae ¥ 










































: t i ay i / mh et oa ty 
6 ie MAT eYE, T20D. OVA DIT VOD” ) 
ie i ; feet an Oh) DOW eam (A oligo cate yikes te Sa) 
BE I efor Gd QnA Po AAU tah 
ait bd ' (twa m) , i ; SO Ny i eis i / ; oka | : ott vt ) 1 i 
i A, e iy 
i snatks id 
i} : 3 es a 
ee j Ra i$ ‘a nate ee 
‘gy wt & ‘tga. ye is Ae a a 
WaTere OINTHYOOSA TAREE 
ou it cyt Jy ve ih i 





iy at 0 





Standard Accounting and Cost System—Electrical Manufacturing Industry 
FOURTH EDITION 


Section 1 


Page 


1 





GENERAL ACCOUNTING SYSTEM 


Balance sheet accounts: Arrangement and titles. 


Assets: 


FIXED ASSETS 
Manufacturing plant (carried at first cost) 
Less, plant depreciation entered in costs 
Property other than manufacturing plant.......................... 
Less, depreciation on property other than manufacturing plant 
INVESTMENT SECURITIES 


CURRENT ASSETS 
Materials: raw, finished and in process 
Notes receivable 


Sic Suits, '9)s(@! cet a) 6) e17eig.e ©) le’ 5 Hansell ee ehrelna) Yale ole chute. 


We) 56) Sloe) fe! ce; lal Be Sule) ec Lewiet © ele: le) 9. ewe) ey eumike 
Wie. 'd\Ge) oh ml (eis) ai) =) (ess!) (6) Xe) Veh le: mh a) ehite (eo) cetis, sae) wok eet) is Chgis wh ajcs: le, eo ele) a 6 lef teale 


Bee. seve ce) 4) a. lel le of el) e)cfexvau oil aise) a hele’) @ue)-6) 6) i 43) 0) @hidiier ec (ste isl iw-lb) 160 Si lief 6) (e).6',.eieh-el 0 fe) 10)’ Spiny ley ol 4. \'ei ie, <e. 


HS .¢; jal eee) dey es ey rey ieee; S. We) eek Ol mst ieucal Gl » Gh) 's) ei) ei Oya) gs: ae 


OTHER ASSETS 
CS OOUL WL emer Me eS OMENS Acie eM) a «ice anette, 2, olki® aoe haabe ee a Bia 28 
Patents, franchises and licenses 


DEFERRED CHARGES 
Pievaloumiernnd: COMpIsiits a0.8, 2 areas oe Les cee kien aves 
Sundry deferred charges to operations 


Total 
Liabilities: 
COURS OOS A Wd) 69 to co a eee ey de a nn 


CURRENT LIABILITIES 
Notes and acceptances payable 
Accounts payable 
CIAL a ene n HER I. esl ate Fs cla diateiaiesstt hoe alos male Ae 
ACCTUCUREIIOS On waretinne aH Oh fetta kt ey chace whale «Ga ne aloes 
Dividends declared and unpaid 
Interest accrued 


Si ig!) eu iee ep ial af veya) fe ot ie \d) eh © fe 6 (0) <0) gi ey ere) a ‘el -w SM ape ee Ral dis ole) vated De erWaliiogee «aire 


Di fag'a) (AWN Net COR e rd: ja lieh e.. 62 tb UO wer me (eye e:ce te 8) Bie) 1, Oot e) ete he sie fie et Je 


Section 3, Page 
Section 3, Page 
Section 3, Page 
Section 3, Page 


Section 3, Page 


Section 3, Page 
Section 3, Page 
Section 3, Page 
Section 3, Page 


. .Section 2, Page 


Section 3, Page 
Section 3, Page 


Section 3, Page 
Section 3, Page 


Section 3, Page 
Section 3, Page 


Section 3, Page 


Section 3, Page 
Section 3, Page 
Section 3, Page 
Section 3, Page 
Section 3, Page 
Section 3, Page 
Section 3, Page 


Section 3, Page 
Section 3, Page 
Section 3, Page 
Section 3, Page 





Total 


Section 1 Standard Accounting and Cost Sy¥stem-~Electrical Manufacturing Industry 
Page 2 FOURTH EDITION 





SUMMARY OF FINANCIAL OPERATIONS: 
(Arrangement and titles) 











Gross sales. billeds):: <...t oo Wee Pee Os Cid ccs Sin whet eh RIE UR eae ANE 
Deduct: 
Returned: Goods ions ee. cats ek kc es bos aie apnea i 10 SRR 
Quantity discounts .......................4. $ 3.46 «eae 
Cash discounts allowed customers........... 0 ey 
Net sales billed (Section 3, Page 19)..............0..0..00. 00.0000. 0c ee Soe «are 
Cost of sales billed (Section 3, Page 19).............. 0... 0c cece eee S22 eae 
ASPOSS MALRUM Fle Cee io shseeUR EN OER oe cH Co. ene tiehy atlne SRR OED SAMMI oo... 
General expenses (Section 3, Page 19)..........0 0... ccc eee $ 
Income from, Operetions: |.) i), seawee ee te ha oo «ls ce ee Sete Mee. ok 
Gther income (Séction Ss, Page 19). 040.5. ce Ve tees wh oe foe tee ae $ 
ae Rotal INCOME (ae is) els i oe oe sie Wiese pray lei a ae > A) SE re 
Interest paid and accrued (Section 3, Page 20)... ........ 0... 0 ccc eee eee be EA os a 
REPO ri nce PAN cE RRO ste, HACK CO ee, aE Ae pee Sit ke hs Se 
¥ederal income tax (Section 3, Page 20).................. Gaotoriss hare 
Dividends (Section 3, Page 20)....................0...005- » Sathana anced i Waswate 4) 
Beermasts SOF the Period 2.326 Pacers hs ee ieh ss Weems b Ob ogy BER ge vis Ul aaah eral 5 FRET oe: 
Contingency reserves (Section 3, Page 18) . (ec tiwenty tay MBG, due paeaioas $ 
Balance carried te “Surplus” account..................0..0 0.0000 e eee aee Sete ee be acs 


Standard Accounting and Cost System—Electrical Manufacturing Industry Section 1 
FOURTH EDITION Page 3 





IMPORTANCE OF DIVIDING INCOME FROM OPERATIONS 
BY DIFFERENT LINES OF PRODUCT 


Companies manufacturing more than one class of material should subdivide their 
sales, cost of sales and general expenses by the various classes of material manufactured or 
sold by them. It is important to know not only that a satisfactory net profit has been made on 
the business as a whole, but that each line of product has contributed its proper share. 


Inasmuch as general expenses are not incurred in equal proportion as between several 
different classes of sales they should, if possible, be allocated or assessed accordingly, and summaries 
of sales, cost of sales and general expenses should be prepared at stated periods, to show whether 
the business done in each class contributes its proper share to the total net profit. 


Other controlling and intermediate accounts 


The bookkeeping term of the principal headings of the ledgers of the Company is “‘con- 
trolling accounts.”’ Those which are intermediate in character are termed ‘“‘sub-accounts.”’ 


The sub-accounts and definitions of the major headings exhibited in the balance sheet 
and the summary of financial operations, will be found in Section 3. 


In addition to these, there will be found in Section 3, the classification and definitions of 
other controlling and intermediate accounts which may be necessary for the recording of expendi- 
tures, receipts and accruals, in order to obtain a comprehensive exhibit of all the functions and 
activities of the business. 


wt Mae 


he 4 


6 a ieesboribilnaee ‘sles ae 
; marie 

 Prehde Cerigaty | f ar aa hey Li ie ‘ tie 
ray th) Deny CEN, pede) keel | Veh bb 
MF mar’ A 
s snociaayel 2! 


% ive Suet ,o fod ie Be 
: ; at. 


asi ah eal 
tes Hae ett ib 
veh Baca ante dei igen Hoe ‘al. 
prem und put : 

A 


pr ? ~ Typ te fret Re 73) 
hy ' ts, 


azn oe y ' 


ay fe 1 ; ‘ 
; nda’ Ke . ns hah ph } pi 4 a ye = Ne ie 


Vid 


ew othe 


peer Wr te yee emg 





(FOURTH EDITION) 


STANDARD ACCOUNTING AND COST SYSTEM 
FOR THE 


ELECTRICAL MANUFACTURING INDUSTRY 


Section 2 


GENERAL COST SYSTEM 








Marra, ¥ Bey) tus ovarian” dA . tae H 


a (Ny 





ms ger yon ah ate | oe : a 
, enreudl arin roRanTAD i Tao re et, 
ieee | S$ naltze® | i ig la a 
’ ) ” s a 


MATEY? TROD JASAMRO 


Section 2 


Standard Accounting and Cost System—Electrical Manufacturing Industry 


Page 1 


FOURTH EDITION 


‘SOSUDAXD U917019S!UIWipD PUD UOIINGIAISIP j}0 DPNjIU) 07 POpUudyU! SIH ‘posn si ,,9S09,, W4DZ 04 UBADUDU/, 4 


"49SOD dOYS 09UI U019GJOSGD40} PPIOP! jOSUOD dq how DSUBAXD JID4IPUi PUD UO)!DOIDBIdDgq Ke 


3509 as 


sosudd x y 


soe euE TS qs09 Sutunqoojnudop 





UO!IQDNAISUO) 
pun 
UdIZD| oO YSUT 


2@SuDddyy 






* = squipjdwuiog puo 
q4s0 ° 
2 = JUDWUAdOjDADG 











Stoo] [Djoad¢gxg SIG 
‘cououng ‘shin 
SP[ON'SUIDIIDY 
2 Wd! (dng 





sqUuiIDidwos 
bu t(Apowoay 
jo4so9 jo 4Ss09 





WUDIg UO. BSUDAY] 


qUDWIdO)|DADG 
-Dazysiuiwipy * u0!2019 DidDq 







19 D4!PUT 












{D14DQOW 940q 07 (D 


quauslindyg ‘sjooy PDDYADAO 






2SUDAXA IDIADIDW 4oqn4 BE plgs IDIdg pud 6719's] [PUD PUA Poiiddy 
on ID ce -yound ‘sbip'splow 6u14 304g 
udI{ndli4zsig DAIQONPIW_ 241 $4UD30q Siaqanaaniee pee bureaciome 


4509 430 SLN3W3713 JH1 40 WHYDVIG 
WALSAS 1S09 1VH3NAD 


5 pees a tastibar 


ae 
Pro idoledjant 
ace 


l art outteRno oi 


tence ee 


esanraqard 


fen ee 


. 


~ — 
—— me a 


a . = x8@02 qori2 cdc Meld edo Sh yiep lloenas od por SERSQAS Jaa iba bas noite 
_asenoqus fai ioseimipseot be nat du iby 3221b i D Douttorrts oS 3 BeCthJey fis DStl a: Jeas “mass oe ee 


te 





Standard Accounting and Cost System—Electrical Manufacturing Industry Section 2 
FOURTH EDITION Page 3 














GENERAL SUGGESTIONS AS TO APPLYING THIS SYSTEM 


The Committee designing this system feels that, no matter how limited the volume of any manu- 
facturer’s business may be, a competent accountant and cost supervisor are essential, if the manu- 
facturer would know definitely the results of his operations and be enabled, because of such 
knowledge, to conduct his business to the maximum advantage to himself and the industry 
generally. 


The Committee would also point out that there are many excellent books and a constant succes- 
sion of more or less illuminating magazine articles and pamphlets dealing with the questions of 
scientific accounting and complete costs, all of which are accessible to the student of these 
problems. Attention is particularly called to the excellent outlines contained in the Federal 
Trade Commission’s pamphlet issued July, 1916, and entitled “Fundamentals of a cost system 
for manufacturers.” 


Nevertheless the Committee desires to be of the utmost service to the electrical manufacturers 
in whose interest it was appointed and has, therefore, prepared a section of this manual, Section 4, 
in which will be found a brief outline of a method (not by any means the only method) by which 
the ‘‘standard accounting and cost system’’ may be carried out and the accounting results properly 
transferred to a series of cost records. 


Acting upon the suggestion in the second edition of the ‘‘Manual,’’ certain sections of the electrical 
industry, interested 1n a specific commodity, have already found it advantageous to form separate 
committees among themselves in co-operation with the standing Committee to decide upon detatls of 
methods best fitted to meet their peculiar conditions, at the same time adhering to the general methods 
of accounting. and cost outlined in “Section 4.” The standing Committee urges that such co-operative 
steps be taken. 


Section 2 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 4 FOURTH EDITION 





THE ELEMENTS OF COST 


All elements of cost should earn some percentage of profit. The money thus employed is neces- 
sarily part of the capital invested and the success of the business requires that all of the capital 
should yield an income. 
On the first page of this section there appears a diagram of the elements of costs which may be 
defined briefly, as follows: 
A. DEVELOPMENT AND COMPLAINTS 
1. Development: 
Research and engineering expenditures preliminary and incident to the regular manufacture of 
products, such as time of engineers and draftsmen, indirect expenses of engineering and drafting 
departments, also experimental labor, material and expense incurred in the manufacturing depart- 
ments, in making, testing and correcting initial product while in process of development; (see 
account No. 13, Section 3, page 16) and all expenditures incurred for initial patterns, molds, 
jigs, punches, dies and special tools as defined on page 10, section 3; also patents purchased (as 
liquidated annually), payments in satisfaction of judgments for infringement of patent rights, 
royalties paid when traceable to a specific product. 

2. Special Tools: 

Duplicate and replacement (not :mitial) patterns, molds, jigs, punches, dies and special tools as 

defined on page 10, section 3. 

3. Complaints: 

Expenditures incurred, after delivery of product, to remedy customers’ complaints when due to 

defects in design, manufacture or installation. 

4. Liquidation: 

The expenditures described in the foregoing should be assembled by individual job numbers and 

liquidated into manufacturing costs in accordance with Section 4, page 11. 

B. SHOP COST 

The full cost of work performed in factory departments, as distinguished from engineering and 

drafting departments. It differs from manufacturing cost, in that the latter includes develop- 

ment and complaints, cost of erection and installation of product, etc. Shop cost includes direct 
labor, productive material and indirect expense, as hereinafter defined. 

1. Direct labor: 

Labor which is performed specifically on account of production orders or directly upon any class 

or type of product. It is recognized, as-a sound, fundamental principle of cost accounting, that 

all labor which it is practicable to allocate as direct labor, should be so treated. (Bonuses are 
naturally an addition to the account to which the wages are charged.) 

2. Productive material: 

Material (plus incoming freight) which can be specifically allocated to production orders and 

which forms a part of the finished product, also boxes and containers made specifically and 

exclusively for such product. 

Note 1. Incoming transportation charges should be added to the invoice cost of material and 
the cost increased accordingly. When this is not feasible the incoming transportation 
should be charged to indirect expense account No. 250. 

Note 2. Unit cost of material, parts and devices manufactured by a contributing department of 
the establishment for which it is possible to determine complete cost per unit should be con- 
sidered as part of productive material and be shown as such on the summary cost sheets. (See 
Section 4, page 3.) 





OT a ail 
1 4 


Standard Accounting and Cost System—Electrical Manufacturing Industry Section 2 
FOURTH EDITION Page 5 





3. Indirect expense: 


All expenditures necessary to the operation, maintenance and administration of the manu- 
facturing departments, except those chargeable to cost of development, productive material, 
direct labor or ‘manufacturing plant’? account. For classification and definitions of indirect 
expense accounts, see Section 3, page 28. 


4, Depreciation of plant: 


For the purpose of emphasizing the importance of including normal depreciation in costs, this 
item, although a part of indirect expense, is shown separately on the diagram. The Committee 
recommends the adoption of the rates in Appendix A, page 11, of this section. ‘Depreciation is 
one of the most important of all overhead expenses, because it is generally the largest. There has 
probably been more written on this subject than any other item of overhead, but there are so 
many different ways of handling depreciation, some of which are best adapted for one line and 
some for another, that there is really no recognized standard method. It is universally admitted, 
however, that depreciation does exist, that it is an element of cost just as much as labor or material 
and that any system which does not provide for including it, is faulty and one that will not give 
true costs. '’* 


5. Depreciation of merchandise at factories: 


In all factories there is an element of loss in quantities of material, raw as well as partly finished, 
due to shrinkage. A small percentage should, therefore, be added to the purchase (or unit) cost of 
such material (or parts) to arrive at shop costs. In addition to this provision it may be desirable 
to establish a reserve to cover possible shortages which, it is expected, may develop when physical 
inventories are taken. 


6. Boxing: 


Labor, material and expenses preparing the product for shipment. In so far as possible unit costs 
should be determined to cover the boxing of ‘‘standard”’ product, while the cost of boxing “‘special”’ 
product will be estimated and added to the other items making up ‘‘manufacturing cost.” 
The aggregate of the items so added to “manufacturing cost’’ should be credited to this account. 


C. INSTALLATION AND CONSTRUCTION 


Cost of material, labor and expense involved in the erection and installation of products after 
their delivery out of the factory. 


D. GENERAL EXPENSES 


Expenses incurred in selling the company’s product (salaries, rentals, traveling, etc., losses on 
notes receivable, customers’ accounts, warehouse and consigned stocks, etc.) and in administering 
the business (salaries, rentals, depreciation of general office equipment, corporate taxes and other 
charges, pension, and other welfare payments, etc.). For details see Section 3, page 21. 


* Quoted from bulletin issued by the Federal Trade Commission 





Section 2 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 6 FOURTH EDITION 


ABSORPTION OF INDIRECT EXPENSES 


Each production center or department should be charged with all expense which can be definitely 
traced toit. In addition it must be charged with its proper share of any expense incurred jointly 
with other centers or departments. 
‘‘These expenses, while part of the cost of a job, are general, so can not reach the job 
direct; hence a method must be devised for them to reach the cost sheet in an indirect 
manner, the method at the same time being so planned that each job will receive its 
fair proportion of the total.’’* 


There are several methods of absorbing these expenses into costs. Those most commonly used are: 


a. ‘“‘Percentage on direct labor” method: 


Basis: Percentage relation of the normal total indirect manufacturing expense to the normal 
total direct labor of a production center or department. 

This method is sufficiently accurate, when employees doing the same class of work earn nearly 
uniform wages per hour and use equipment of substantially the same size and character. It fails 
to take into account, however, the great variations, when they exist, in such items as the value 
of equipment employed, the expense of supervision over different classes of employees (those 
earning low rates of pay often requiring the more costly supervision), the quantity of power 
required to operate equipment, etc. 


b. ‘Productive man-hour rate’ method: 


Basis: Normal total indirect manufacturing expense allocated pro-rata the normal total pro- 
ductive man-hours of a production center or department. 

This method avoids the variations due to the different earning capacities of employees, which is 
an inherent weakness of the ‘‘percentage on direct labor’ method, but does not take into con- 
sideration the variations in value of equipment, expense of supervision, quantity of power 
required, etc. 


c. “Machine hour-rate’”’ method: 


Basis: Normal indirect manufacturing expense allocated to individual machine tools, or groups 
of them, divided by the normal total number of hours the machine tool or tools operate during a 
year. This method produces more accurate results for certain classes of product, but requires 
somewhat greater refinement in the distribution of expenses to production centers and incurs 
somewhat larger clerical expense. 


d. “Application on material’ method: 


Expenses which relate primarily to material, are as a rule, subordinate and of secondary impor- 
tance to those relating to manufacturing operations as a whole. Moreover, the fluctuations in 
the prices of material are, over a cycle of years, so much greater and more frequent than those in 
the rates of labor, that material furnishes a less stable and, therefore, a less dependable basis 
upon which to allocate indirect expense. or these reasons it is considered undesirable, as a 
general rule, to use material as a basis for absorbing indirect manufacturing expense. 

However, in certain branches of the industry or in certain departments, conditions exist which 
are exceptional to the premises above stated, such as: (1) material bought for resale on which 





* Quoted from bulletin issued by Federal Trade Commission. 


Stamdard Accounting and Cost System—Electrical Manufacturing Industry Section 2 
FOURTH EDITION Page 7 





little or no labor is performed, and (2) material for manufacturing where the labor performed is so 
small or inconsistently variable that if used as a basis for burden it would give incorrect results. 
In these cases, expense may be applied as overhead directly to the material, especially such expense 
as purchasing, transportation, demurrage, receiving, storing and handling. In such cases the 
expense should be absorbed on the basis of volume, units, weights or value of material, whichever 
is found to be the more equitable. Value should not be used when many different kinds of 
material, widely different in cost per unit, are purchased. 


There are cases where the direct labor involved is so small in relation to the material that it is 
obvious that the expense of handling the material alone would exceed the total overhead expense 
absorbed by the plan of applying overhead to productive labor as a base. In these cases it may 
be advisable to apply part of the overhead burden against the direct labor on the job and the bal- 
ance based on some unit of the material as suggested above. When burden is applied both on 
direct labor and on units of material, the amount absorbed on the basis of material of course 
should be credited to the expense accounts from which derived in order to avoid over-absorption 
by duplication of amounts included in costs. 


The conditions of production in the electrical industry vary so greatly that no one method of 
applying indirect manufacturing expense can be consistently recommended for universal use. 
The “percentage on direct labor’? method appears to give the most satisfactory results over the 
widest field, with minimum clerical labor. Under some conditions, however, and for some classes 
of product, either the ‘‘machine-hour rate’’ method, the “productive man-hour rate’’ method or 
the “‘application on material’’ method insures somewhat greater accuracy. Since it is to the 
interest of all manufacturers to make their costs as accurate and complete as practicable, a care- 
ful study of the various methods is advocated, so that the method which will give accuracy for a 
particular class of product, under existing local conditions, will be used in determining the cost 
of that product. 


USE OF NORMAL OR AVERAGE RATES OF INDIRECT 
MANUFACTURING EXPENSES IN COSTS 


Indirect manufacturing expenses do not fluctuate in parallel with the volume of production. 
Therefore, costs obtained by using a temporarily high or low percentage or machine hour rate 
(because production for the periods upon which they are based is subnormal or abnormal) are not 
true costs, as applied to most lines of production. 


The fiscal year is largely an arbitrary period and may not represent average conditions. Conse- 
quently, the attempt to absorb the indirect expenses in the costs of the fiscal period in which they 
are incurred may work injustice or entail loss. It is, therefore, sound accounting and good 
financial policy to recognize, in determining the cost of production, the principle of the con- 
tinuity of time. 


To avoid violent cost fluctuations, normal or mean average rates based upon a cycle of years 
should be used in cost estimates and in costing production and shipments. It will take study and 
care to determine such rates and to keep them normal. 





Section 2 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 8 FOURTH EDITION 





It is recommended, therefore, that: 


(1) Normal or average rates (based on direct labor, direct labor hours, or machine rates) be es- 
tablished for separate departments or classes of product and used for cost estimates and in 
costing production and shipments. 


(2) A separate ‘“‘Reserve for indirect manufacturing expenses” be set up for each department or 
class of product, created primarily from amounts over-liquidated, i.e., amounts charged 
costs of production in excess of actual indirect manufacturing expenses, during periods of 
abnormal production, when the rates used in costing are higher than the actual. If the 
reserves established in this manner are insufficient, they may, if the Board of Directors 
approves, be supplemented by appropriations from surplus. 


(3) Under-liquidations of indirect manufacturing expenses, during periods of subnormal produc- 
tion, in any department or class of product, be charged against its reserve. 


(4) Constant study and comparisons of the production and expense factors be made by means of 
charts and statements, so that the established normal or average rates may be periodically 
corrected or revised as experience or conditions may require. 


(5) Inventories at the close of the fiscal year should be valued, for balance sheet purposes, 
upon the basis of normal rates of overhead. 


Note: When, as a policy of conservatism, an adjustment of inventory is made to the 
basis of current overhead cost, in those years when current rates are lower than 
normal rates, this adjustment should be a temporary entry to be reversed at the 
beginning of the succeeding fiscal period, and this practice should be interpreted 
as the exercise of executive conservatism rather than cost accounting procedure. 


SPOILED WORK 


The hazards connected with the production of electrical apparatus and material and the problems 
of new and useful applications of electricity to commerce and industry, which every manu- 
facturer must face as part of his every day experience, involve losses arising out of the unsuit- 
ability of initial production to perform the service for which it is intended, incorrect or incomplete 
interpretation of specifications and drawings, unsuitable or defective material, careless workman- 
ship or accidental damage. Whether these losses are due to the highly technical nature of the 
business or the factor of human fallibility, they constitute a risk which is inevitable and which 
must be covered in manufacturing costs. | 


When such losses occur in the production of special apparatus on specific customers’ orders, 
they may be charged as part of the cost of such orders. When they occur in connection with 
standard production, they may be charged to labor or material cost, if they can thus be allocated, 
or to indirect manufacturing expense account No. 280, if they cannot. 





Standard Accounting and Cost System—Electrical Manufacturing Industry Section 2 
FOURTH EDITION Page 9 





ESTIMATES OF COST 


Among the many requests made by electrical manufacturers, was one urging the standing com- 
mittee to outline, as a suggestion, the proper basis for preparing cost estimates for purposes of 
commercial quotations. The Committee recognizes fully the difficulties associated with any 
attempt to amplify a course of procedure which would apply adequately or equitably to the many 
and varied lines of electrical product. 


It has therefore prepared only the barest outlines of what it considers the underlying principles, 
but -will be glad to make further study of this important subject if it receives from electrical 
manufacturers a general request that it do so. 


In the preparation of the following suggestions, the Committee had the benefit of the counsel 
and co-operation of a number of cost experts who have been long and prominently identified, in 
the electrical manufacturing industry, with this important and essential work. 


The primary steps to be taken in preparing estimates are: 


1. Obtain from the selling and engineering organizations complete information as to the character 
of the apparatus, device or material upon which the estimate is to be made. This information 
should include details as to quantity, delivery date, rate of production, dimensions, type, 
capacity (kw. or h.p. rating, etc.); also weight, construction details, and kinds and grades 
of material of each component part. 


As one of the most fruitful causes of underestimating is the failure to include the cost of all 
the parts in process, great care should be taken that the bill of materials and the list of labor 
and other details are complete in every respect and are constantly reviewed by the engineer- 
ing and manufacturing organizations. 


2. Ascertain cost of apparatus, device or material previously built and similar to that for which 
estimate is to be made. Revise such cost to conform to the probable prices at which materials 
can be purchased at the approximate time at which the apparatus will be produced; also the 
probable cost of labor at that time; add indirect. expense for manufacturing at correct and 
established rates; add distribution and administration expense at current and duly verified 
rate. To make sure that apparatus, device or material upon which estimate is to be made 
will bear its proper burden of indirect expense for manufacturing and for distribution and 
administration, these should be carefully departmentalized, as outlined on page 6, Section 2. 


3. If the apparatus, device or material upon which estimate is to be made is only partly similar 
to that for which a previous cost is available, revise such cost according to the procedure 
outlined in paragraph 2, and add estimated cost of new features, to be compiled in accord- 

-ance with paragraph 4 relating to new apparatus. 


s 


4. If the apparatus, device or material is wholly new, secure complete and carefully verified (as 
to quantities, weights, etc.). bills of materials from engineering departments with estimates 





Section 2 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 10 FOURTH EDITION 


of developmental and special tool expense necessary to put it in successful production, 
including testing; compile material cost estimate with aid of Purchasing Department; obtain 
from foremen and rate setters probable direct labor costs; add indirect manufacturing expense 
at correct and established rates; add distribution and administration expense at current and 
duly verified rate. . 


5. At the risk of repetition and because of their paramount importance, if complete cost estimates 
are to be secured, the necessity of including the following items in the preparation of estimates 
under paragraphs 2, 3 and 4 are emphasized: 


(a) Experimental engineering and shop development, including patterns and tools. When 
apparatus is so special that tools, patterns, molds, punches and dies cannot be used 
again, the entire cost of such tools, etc., should be liquidated in the cost of the order 
(see page 4, Section 2). 


-(b) Boxes, crates and other containers; be careful to make extra allowance when for foreign 
shipment. 


(c) Possible extra cost, during production and after shipment, when emergency conditions 
require the production of wholly new or partially new apparatus without sufficient time 
for normal development. 


(d) Installation and freight, when specifications or contract provide that these expenses 
be borne by the manufacturer. 


Standard Accounting and Cost System—Electrical Manufacturing Industry Section 2 


FOURTH EDITION Page 11 





Doe 


6. 


oe] 


APPENDIX A 
Determination and application of rates 
for depreciating manufacturing plant account 

GENERAL 
All rates are to be applied to first cost. 
The rates recommended are those which are to be applied to first costs to obtain amount to 
to be included in costs and estimated costs, and are in addition to maintenance expenditures 
and renewals as provided for in indirect manufacturing expense accounts. 
All rates recommended are based on the tabulated experience as well as the general judg- 
ment of many manufacturing engineers and superintendents over a cycle of years, and are 
the average of abnormally high as well as subnormally low production. 
All rates recommended are therefore based on normal costs and operating conditions. In case 
of afactory working overtime and with night shifts for any appreciable length of time, or 
under other extraordinary conditions, or in the cases of facilities acquired at excessive costs, 
higher rates may, as an act of extra conservatism, be assessed so as to absorb in the costs 
during the period of extraordinary activity: 

1. The abnormal physical exhaustion. 

2. The abnormal primary cost of buildings and structures. 

3. The cost of equipment estimated to be surplus in normal times. 
Conversely, under subnormal operating conditions the normal rates recommended below 
may be reduced, but not in the same rativ as the volume of subnormal business is below the 
normal volume, inasmuch as obsolescence obviously continues regardless of the volume of 
business. 
Rates recommended are to be applied to the items shown in the further subdivisions of 


i D) 
the manual, Section 3, page 2. Ananda ereaete 


LAND RECOMMENDED 
Pie USE) ERC ee Ae 0) 0c a tee eed ME ade ius 6 uid Felten s oe ke es 0% 
Lafidt= eradmoandiumprovenentsi() 1.5) Motwutisel We. Ga ieikeood.. 0% 

. BUILDINGS 
a. Buildings (total reserve 75%) 
NV OoCeM Deis s ai eOUS tea: cee s ye ae kes oe ck tee 10% 
oly ALP ERIS laf ay ataln ew CEG A tees Slee bie i be At ae 10% 
iC atide woor Ciilll CONSLEUCHION):. os ces st cere. he eee yas fete 5% 
Brick and steel (fireproof construction)... 2.2.6. ...00 200... e. 3% 
Reinforced concrete (fireproof construction)................... 3% 


Note.—In those cases where plant accounts include accessories, care should be taken 
to segregate such accessories, in order that the proper rates of depreciation may 


be applied. 
b. Structures (total reserve 90%) 
Se UG Teen 6 a MEME as iwites Ada Sates nat eds, Hebe shut WV) hy RISE Ie «ig dled och 124% 
- Water, drainage and sewer pipes (outside of buildings)......... 6% 
Piping and electrical conductors (outside of buildings).......... 6% 
Cua oprnkiersustem. (totalaeserve 90%) i iiveuwie oe Wad Pee cage eae 5% 
d. Heating and ventilating and other inside piping and wiring (total reserve 90%) ; 
RCA TALITY Viet CURSO uuu le Jyh NIRV aban dys ve manyeletd » ) dyslre d= ARG Be 


Fer eirl Ora ine anc WITine seul Willa AL alee cs «1,9 a2! Cie. bie 5% 





Section 2 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 12 FOURTH EDITION: 





ANNUAL RATE 


C. MACHINERY AND TOOLS RECOMMENDED 
a. Machinery (total reserve 90%) 
Special.machinery, pfia blige sv alvil eae lance og a Sold een dei gees 74% to 90% 


Rates on special machinery depend upon the estimated period of present use 
and their adaptability for other use. 


Standard machinery. suey oil tyicadeuts a cle eee AN ec oreees e 7% to 10% 

Electrical appara tiusy): oAlhis a! deans ke Ako ae) eee! 7% to 10% 

Ovens andjfurnacessMs Maui sctidiie Je. ae on leat 0 10% 

Power. plant.equipmenta. ti). 2<e ay fai emit oho bee TM%% 
b. Machinery-foundations and installation (total reserve 100%) 

Foundations for machinery and apparatus.................00- 124% 

Installation oftimachinery. “Conc eae ee eed 124%% 


YEARS TO BE 


APPLIED 
c. Semi-durable tools and instruments (total reserve 100%) 


*Semi-durable tools, 25% on each year’s expenditures...... 4 
Set up on the books an estimated value 
equivalent to the additions to the 
account during the last 4 years. 

*Electrical equipment, 162% on each year’s expenditures... . 6 

+Molds, jigs, punches, dies and special tools. 

(There will be no depreciation on this item.) 

*Metal flasks 

Inasmuch as all foundries have their proper equipment of metal 
flasks, the cost of making all metal flasks is to be charged to indirect 
expense account No. 460. When flasks are scrapped, the scrap 
value will be credited to indirect expense account No. 460. The 
difference between the inventory at scrap value at the beginning 
and end of the year will be taken in the expense account. There 
will, therefore, be no depreciation on this item. 


D. PATTERNS AND DRAWINGS 
a. [Patterns 
b. {Drawings 
There will be no depreciation on these items. 





* Set up on books a value obtained by inventory where practicable. Where this method is imprac- 
ticable, a value should be set up on basis of previous years’ additions, the number of such years being depen- 
dent upon the varying circumstances. 

+ Set up on the books estimated or appraised value of a working supply; expenditures for new equipment, n, 
whether initial, duplicate, or replacements are chargeable to Development and complaints. (See paragraph 
A, Section 2, page 4.) 

{ Set up on books estimated or appraised value of a working supply; expenditures for new patterns, 
whether initial, duplicate, or replacement are chargeable to Development and complaints. See paragraph A, 
Section 2, page 4.) 


Standard Accounting and Cost System—Electrical Manufacturing Industry Section 2 
FOURTH EDITION Page 13 





YEARS TO BE 


APPLIED 
E. FURNITURE, FIXTURES AND APPLIANCES (total reserve 100%) 
a. *Furniture and fixtures 
in shops 
b. *Furniture and appliances 20% on each year’s expenditures. . i) 


in factory offices 
e. *Fire protective apparatus 


From a valuation viewpoint, it is recommended that 100% reserve be set aside. 


« 


ANNUAL RATE 


F. OTHER EQUIPMENT (total reserve 90%) RECOMMENDED 
Railway tracks and overhead equipment; renewals and repairs charged to 
DPETALMINECRDCTISC Ing to. Our ae Cee Am ine See eee 8 ie toe Ged aie None 
PCAC SCOC I INL REN wn Meee Cece SA tit Oy cares § chat Pile ails tbe aye wo dee's 3 to 6% 

wAutomopiles and other conveyatices (6 6 Phi ee ee dee tedeles cadens 25% 


II. PROPERTY OTHER THAN MANUFACTURING PLANTS 


The rates recommended are those that would be applied for similar items for manufacturing 
plant items. In case items are dissimilar, rates should be applied consistent with those used for 
manufacturing plant items. 


The accounting procedure for absorbing depreciation in manufacturing cost is explained in 
Section 4. 


* Set up on the books a value obtained by inventory where practicable. Where this method is imprac- 
ticable, a value should be set up on basis of previous years’ additions, the number of such years being depend- 
ent upon the varying circumstances. 


s 





A fon an ey Pe 
‘O: ft ade 


te 
wy 


\ 


ect es ike 


z 3 ie ie 


/ whe 


Pip nena #i sh triaqerahe axes oy 


1 
1 


vi 


ae av isei. Lilies) ‘TnsMaTIga 


Oy: ab SOS in wee oat rh > {raiginpo bao oa) has wildiees’ “e 3 
BAYS pa ag PRADO, | eS ‘gnifsipqe: 
RM iste: si Ee 


4 


ed, OM whine ‘ Aah iN 


se: (Pt 


Vy ae i eae te) Secbat dh Breis fos ieameua age 
. / wh a vatican) wait ee hG? ne assur 


« 


oR isp at ei Tay, Ho oa ion mn tf heli 3 
i MENGE AE Wg Sh aoiny a sn bet Pufies 


Ua | RU evs 0 hah’ 
WA! 


gin 


Hered + 0. ye wheal TaigUbN Sy 


aye 





(FOURTH EDITION) 


STANDARD ACCOUNTING AND COST SYSTEM 
FOR THE 


ELECTRICAL MANUFACTURING INDUSTRY 


Section 3 


CLASSIFICATIONS AND DEFINITIONS 
OF THE 
CONTROLLING AND INTERMEDIATE ACCOUNTS 
OF THE 
GENERAL ACCOUNTING SYSTEM 





SS 


bi 
at 







| A 4 aoe re | ; F J mi F, 7 AE: Mi 
ees, TATCOREALD OAT TOE RAR LASTED) A ane as 





Ba i | CROPTIMTT OWA BNORPADTHERLES |. 


¢ P * i in 


Sp eae EPNVODIA STACUM ASTM. CA: DALMORTHOD | | via 
4 Rae Tee THT We | Wy a 


MATEY 2 QUEL MIO DA aan : 





hw ‘ 
‘ ( 
1 : 7 a 


sent 
=~ 





Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 
FOURTH EDITION Page 1 





Asset accounts INDEX Pies Nes 
MP VEAULAPUUEIN OD IATNOY 5 oss clg ccc ce cise on MOE EO ica oc tos aa 2 
page oper eyaetherithan- manufacturing planter. 2)... 0a oye eed thoes Pe ee 13 
REV eS orrCtrCCCUTILIES OMG fs BIRO Me as os Ue Soaias Bek ne ek er ek clea ae 14 
Papiateriaiss raw) finished and ‘in process} aw OU es Ge. 0 i, ee 14 
Dame Noves receivable: SRO OMe A A Oe) Se hema eel YN tte UN eg 14 
SSR SCOUNEL SF ACCOULL UBS ete die at ee AURA MOO arti . ch. eee ay 14 
OUNCE ACCOUNTS TECel VA DIG: aim ics eM er re eee Ui i, | 1 eae 15 
SOM eTNICT SCOUT Les a a awn we Men ne aaa te ks AR cc aR AS oe 2s og eyes alan 15 
OLD DU Me bee ee eM AE ee A Sr ROL Rg ORT! Ada i oe 15 
107" Sinking and other furndsiarn.-) frost oe hae ay oc de Soloed boa ee 15 
LEe Good. will vi een enn eee eS eel, eae Or eel ed 8 a aso od ea owls no 15 
Da Patents siranchises Ghauicensce yi ih: ii Been ct ote es cs sep ole nue atiace «ae bo 
13. Development and complaints...™~%........00....041 hastens Sia OE EEL ee 16 
14 ounce deterred, Chatcesito OPEravions? | rt. eee. ee ca weds wae heels 16 
Liability accounts 
LESS APL W Wea 1% LAGG os 0 ea vc en a lish hy Re neces pig Ms Rl ie, EMSA dal te a DN Be 17 
DOME NOLOGET TU Aer COUl i CGaia.a DLE wren tl coca Miia ialihe weet wae dial. uit a wia'e wales gf's Mate 17 
Pies COOUT LS ava CM armo ck ter gars air Jt lg RMR ee my ules 17 
Dre chert Clae reste RUMMY OME R I Wa oe SW oh kos «ace a edhe abn anche idl» Md adie « abs 17 
LO EG OEe OL CiT ese. eee maine, elie hs tay 5. LieSaartahes Wohin tebe Sites « WARRUMM Soe a Oe S 17 
20) *Diwidendsdecinred' and anpdid ..).28 PC EMR eG eGo BBA PME m ee: 17 
at STILE bc at ACCLUCU TT 1s a tees Fo eth Ris et ee RD ed, hak de 8 17 
oan ommemice COLECTIONS On Shiesriia al seta. ele le Pd ape Ses Mealea a alah alte care datas 1 by 
2oeur enimdenrectationentered If COSLS ho ash othe Boge ee eas sae sib volves mn eulee 17 
24. Depreciation on property other than manufacturing plant.~.................... 18 
ey MN CIT OM ECCT UCR AMAR iW RN Gednii nic. avi ale «a de fanal a, wo 01d ghel Mle eos + mle Bee ld Obie 187 
ALE A ENG SCRIBES ated ) bic be ay et Mev Rieu se Gree Pama Re ok oT of AS A 18 
Le WEIN PENEVITCSETIVES {SUAS wien one eae «oe SAN RS... CU 18 
Zo epiopiuse including undiyidediprofits)..... . 21... eReben tl whet. eee 18 
Summary of financial operations—accounts 
PPE CREE ors CMRI rep st MT ce ike cn sw) arel } toc P eeyhpeess in 2.4 fe ee «2 <9 + aye eh neta 19 
By Se OS ERECT ECL tm, Se) ot crane a RR 8 ee Rs Sel a, seal vas, 19 
MRTG RSE SA treo cade aid Pee SS she MR a ha Rew MOBO D ohn aig raed Mela ad ee 19 
ee CLEAN Me fe cc Core eee ek de AN Gino) ci AY tims aal a P< <5 4S ae wig eae 19 
SPM TAGE TO Cry tie AT 1 OC TRIOUL Sire = 6s. tiik ace poe, hc 6 clatag! TD Ae eRe chee Fw! 4, < welaleatgme a a ARS 20 
ee AGT MTCC IRR MMM MEM: (EEN. icc cae sacs te onsale) sgencielins vain ioe Walaa: ale’ s, Glalehaeta ee ayaluie'e 20 
USACE CCL << pene ey ee St 8 6 At S ARR ASIOD USAN Die PRE LAR RTS NEE 20 
Rrenetamen Dc Ncoreu DeneCOUNLS MAT. yo. shunt aves 1). cei any eis ale da ohn viele ad = he oteedete 21 
INOVeCrpalementall Gx Dense VACCOUNTS = a7 re bus COM Re sed sl li beg | a's ane hanae meine ae 
Pndirect, Mantiacturimy EXpense ACCOUNTRE. see, Lee, eens. @ Shs a careestoy obo chia tale gee 28 
Definitions of indirect manufacturing expense accounts .............+.0005 ae 2 
POWere ea and glit ACCOUNTS. ARE . tld LOREEN, oa cele oie viene ee wt eee 44 


CLASSIFICATIONS AND DEFINITIONS OF ACCOUNTS 


Maintenance-accouUuntSnsr err OER hee OE OE EE EERE ET ERT TEE OS EE PETS ETT PS 48 





Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 2 FOURTH EDITION 





1. MANUFACTURING PLANT 


Condensed accounts Sub-accounts Further subdivisions 


A Land. sos cas ete a {Lands ee: sae ee ee { Sis thane aie eh NR 


2. Land—grading and improvements 


1. Buildings 
2. Buildings—grading and filling 


as Buildings ff oa 


1. Structures 
Do Stractutes s 6. ee 2. Water, drainage and sewer pipes (outside) 
3. Piping and electrical conductors (outside) 


B. Buildings........ 
c. Sprinkler system........ 


d. Heating and ventilating and 


folic Aas 1. Heating and ventilating 
other inside piping and 2. Other inside piping and wiring 


1. Machinery 

2. Electrical apparatus 

3. Ovens and furnaces 

4. Power plant equipment 





a:. Machinery 20). i.e 


| L 
C. Machinery and b. Machinery—foundations f 1. Foundations for machinery and apparatus 
tools. cuits and installation........ | 2. Installation of machinery 


1. Semi-durable tools 
c. Semi-durable tools and in- | 2. Electrical equipment 
struments.............. 3. Molds, jigs, punches, dies and special tools 
4 Metal flasks 





D. Patterns and ‘Se Paterna ssi Suen ano 
drawings...... |.b.. Drawings.............(edile 


E. Furniture, MENG eee ee 
fixturesand 4 b. Furniture and appliances in 
appliances... factory offices.......... 





Le Fire protective apparatus. . 


1, Railway tracks and overhead equipment 
F. Otherequipment . a. Otherequipment........ 2. Rolling stock 
3. Automobiles and other conveyances 


(ay Buildings o¢\ . 4...) ae 
b. Machinery and tools..... 
c. Furniture, fixtures and 

appliances. 3.3... 


G. Unfinished plant . 





Standard Accounting and Cost System-—Electrical Manufacturing Industry Section 3 


FOURTH EDITION 


Page 3 





A. LAND 


(1) 


(2) 


B. BUILDINGS 


Definitions of se ei plant accounts 

‘ ‘ 
Purchase price of land for manufacturing purposes ( (including buildings located thereon 
which will not be used for manufacturing purposes) together with costs of damages, 


fees, surveying, services of experts and any assessments \due at the time of purchase. 


(If subsequently the buildings referred to are sold, the priceeds should be credited to 
this account.) " 


ai P 
Cost of grading and filling not done specifically for the rection of new buildings; al 
cost of all roads, driveways and sidewalks, including engineering. 


Further subdivisions: in LAY ae ee 
f 
1. LAND—PURCHASE PRICE ‘ 
f 
2. LAND—-GRADING AND IMPROWEMENTS 


| 
f 


First cost of all buildings and structures and permanent additions thereto, including cost of 


excavations, foundations and grading, and all piping, yess and fixtures which form an integral 
part of the buildings or structures. 


This account will include, in addition to the cost of main phates the cost of the following: 


Canopies ~ Rough of u.,,sheds Storage tanks (above 

Bins Me, Reta‘ walls and below ground) 
Cisterns Water tanks ( Crane runways (inside 
Wells Stand pipes and outside of buildings) 
Fences Trestles and tunnels’ 

Reservoirs 


Draw and other bridges 

Water, sewer and drain pipes (outside) 

Steam, gas, air, fuel oil and hydraulic pipes (outside) 
Electrical conductors (outside) 

Subways and conduits (outside) 

Sprinkler systems 

Heating and ventilating systems 

Other piping, plumbing and electric wiring (inside) 


Sub-accounts: 


a. Buildings 


(1) 


First cost of all buildings and permanent additions thereto, such as shop buildings, 
foundries, storehouses, power plant buildings, factory office buildings, and all other 
buildings occupied by productive or non-productive departments. Costs of buildings 
include cost of excavations and foundations, sectional metal partitions, fire escapes 
and iron ladders attached permanently to buildings, steel floor plates which serve as 
part of the floor, crane runways installed at the time of the erection of buildings, also 
bridges connecting two wings of the same building or two adjacent buildings. 


Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 4 FOURTH EDITION 


(2) First cost of grading and filling, when done specifically for new buildings. 


Further subdivisions: 


1. BumILpIncs 
2. BUILDINGS—GRADING AND FILLING 


b. Structures / 

(1) First cost, pe cost of excavations, foundations and grading, of all permanent 
structures andy ™4rmanent additions thereto, located outside of buildings, which are 
either roofed and without sides or with sides and without roofs, such as canopies, 
rough open sheds, bins, yard racks, etc.; also storage tanks, reservoirs, cisterns, wells, 

and staid pipes, whether located above or below the ground; fences, draw and other 
bridges, trestles, crane runway, retaining walls and tunnels. 
Note 1. Does not include cost of bridges connecting two wings of the same building 
or two adjacent buildings. (Seeaccount No. 1-B-a-1.) 
Note 2. Includescost of ground tracks for gantry cranes, outsiderunwaysand brackets 
when attached to buildings, also outside runways and their supports 
when not attached to buildings. 


(2) First cost of all permanent water, drainage and sewer pipes and their fittings located 
outside of buildings. 


(3) First cost of all other permanent piping, electrical conductors and subways, located 
outside of buildings, as follows: 
(a) Steam, gas, air, fuel oil and hydraulic pipes and fittings. 


(b) Electrical conductors fcr power and lighting current, from the main distributing 
switchboard, through yards, up to (but not inside of) buildings. 

(c) Subways for underground pipes and conductors, also poles and fittings for over- 
head conductors. 


Note 1. Does not include cost of outside wiring for telephone, fire alarm and watch- 
men’s systems. (See account No. 1-E-a. and 1-E-c.) 


Note 2. Doesnotincludecost of railway overhead conductors. (See acct. No. 1-F-a-1.) 


Further subdivisions: 


1. STRUCTURES 
2. WATER, DRAINAGE AND SEWER PIPES (OUTSIDE OF BUILDINGS) 
3. PIPING AND ELECTRICAL CONDUCTORS (OUTSIDE OF BUILDINGS) 


c. Sprinkler system 
First cost of all sprinkler pipes and fittings. 


d. Heating and ventilating and other inside piping and wiring 
(1) First cost, including cost of foundations and installation, of permanent heating and 
ventilating systems and permanent additions thereto; embracing steam heating mains, 
pipes, coils, radiators and fittings, ducts for heating mains inside of buildings, smoke 





Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 
FOURTH EDITION x Page 5 





exhaust ducts, hoods, oven blocks with fires, stoves and stove pipes, etc., used for 
warming and ventilating buildings; also hoods placed over grinders and other tools, 
and necessary piping, etc., for carrying off emery, brass and other deleterious dust. 


Note 1. Does not include cost of steam vacuum pumps, blowers, fans or exhausters. 
(See account No. 1-C-a-1.) 


Note 2. Does not include cost of motors used to drive any of the equipment, the cost 
of installing such motors or of electrical controlling devices for them. (See 
accounts Nos. 1-C-a-2 and 1-C-c-2.) 


Note 3. Does not include cost of piping, etc., connected with ovens and furnaces used 
for manufacturing purposes. (Seeaccount No. 1-C-a-3.) 


i 


(2) First cost, including cost of installation, of all permanent piping, plumbing and electric 

wiring inside of buildings; including drainage, sewer, water, gas, ? r, oil and hydraulic 
pipes and their fittings; plumbing and toilet fixtures; hose connections from pipes to 
automatic tools; cable and wires for power and lighting circuits, also wiring devices, 
such as sockets, receptacles, switches, cutouts, insulators, conduit and moulding for 


wires. 


Note 1. Does not include cost of inside overhead wiring for railway equipment. (See 
account No. 1-F-a-1.) 

Note 2. Does not include cost of inside wiring for fire alarm, watchmen’s clock or 
shop telephone systems. (See accounts Nos. 1-E-a and 1-E-c.) 

Note 3. Does not include cost of wiring in connection with the installation of electri- 
cal apparatus. (See account of No. 1-C-c-2.) 


Note 4. Does not include cost of pipes and fittings for ee system. (See 
account No. 1-B-c.) 


Further subdivisions: 


1. HEATING AND VENTILATING 
2. OTHER INSIDE PIPING AND WIRING 


C. MACHINERY AND TOOLS 


First cost, including cost of transportation, foundations and installation, of machinery, semi- 
durable tools and electrical apparatus and equipment; also appraisal value of a working supply 
of molds, jigs, punches, dies, special tools, metal and snap flasks and metal arbors and cores, except 
equipment chargeable to the following accounts: 


Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 6 FOURTH EDITION 





Sub-accounts: 
a. Machinery 


(1) First cost, including transportation, of machinery, such as planers, slotters, mills, lathes, 
drill presses, punch presses, drop hammers, atitomatic tools, elevators, cranes, hoists 
and conveyors; testing, japanning, winding and taping machines; pumps, compressors, 
accumulators, blowers, engines, boilers and stokers; also track, stationary and portable 
platform scales; except machinery chargeable to the following accounts: 


“Power plant equipment’? (No. 1-C-a-4.) 
‘“‘Semi-durable tools’’ (No. 1-C-c-1.) 

“Electrical equipment” (No. 1-C-c-2.) 

“Shop fixtures and equipment’’ (No. 1-E-a.) 
“Rolling stock’’ (No. 1-F-a-2.) 

‘“‘Automobiles and other conveyances’”’ (No. 1-F-a-3.) 


Note 1. a... not include cost of motors attached to machinery, except those insepa- 
rably attached (as to electric hoists), or small auxiliary devices used with 
such machinery. 


Note 2. Includes cost of countershafting which is usually bought as part of machines. 


Note 3. The cost of small cutting tools is chargeable to indirect manufacturing 
expense, account No. 244. 


Note 4. Does not include cost of foundations for, and installation of, new machinery. 
(See accounts Nos. 1-C-b-1 and 1-C-b-2.) 


Note 5. Does not include cost of that class of special tools referred to in account 
No. 1-C-c-3. 


(2) First cost, including transportation, of electrical apparatus, such as motors having a 
capacity of 14 h.p. or greater, which are direct connected, geared or belted to machine 
tools or other equipment, and all motors of similar capacity connected to line shafts; 
also all motors, rotary converters, motor-generator sets, turbo-generator sets, marine 
engine generator sets, transformers, and induction regulators of 20 kw. capacity or 
greater, etc., used for testing or for general purposes; also switchboard panels (marble 
or slate) costing $200 or more each; except that chargeable to the following accounts: 


‘Power plant equipment”’ (No. 1-C-a-4.) 
“Semi-durable tools’’ (No. 1-C-c-1.) 

“Electrical equipment’’ (No. 1-C-c-2.) 

“Shop fixtures and equipment”’ (No. 1-E-a.) © 
“Rolling stock’’ (No. 1-F-a-2.) 

“Automobiles and other conveyances” (No. 1-F-a-3.) 


Note 1. Does not include cost of motors which are inseparably attached to electric 
hoists or to electrically driven portable tools. (See accounts Nos. 1-C-a-1 
and 1-C-c-1.) 





Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 
FOURTH EDITION Page 7 





Note 2. Does not include cost of foundations for electrical apparatus. (See account 
No. 1-C-b-1.) 

Note 3. Does not include cost of installing electrical apparatus or of its controlling 
equipment. (See account No. 1-C-c-2.) 


(3) First cost, including cost of transportation, foundations and installation, of ovens and 
heating and melting furnaces (except those chargeable to the power plant); such as 
foundry furnaces and cupolas, geared foundry ladles, baking and drying ovens, core 
ovens, porcelain kilns, smith forges, rivet forges, annealing furnaces, gluepots, solder 
melting pots, boiling tanks, gas stoves and heaters, etc., (exclusive of small bench 
devices); also of their equipment, consisting of pipes, flues, stacks, etc., heating coils, 
grates and oil and gas burners. of 
Note 1. Does not include cost of masonry flues, ducts and stacks which form aiv 

integral part of buildings, as their cost will be included in the cost of 
buildings. 

Note 2. Does not include cost of motors incidental to ovens and furnaces, the cost of 
installing such motors or of electrical controlling devices for them. (See 
accounts Nos. 1-C-a-2 and 1-C-c-2.) 

Note 3. Does not include cost of blowers, fans or exhausters for forced draft and cir- 

' culation of air, or pumps for fuel oil. (See account No. 1-C-a-1.) 


(4) First cost, including cost of transportation, foundations and installation, of all equip- 
ment located within power plant buildings; such as engines, turbines, boilers, stokers, 
generators, compressors, pumps, condensers, transformers, switchboards, piping, 
cable; also of all accessories forming a part of the power plant equipment. A separate 
shop order is to be issued to cover the cost of fundations for, and installation of, this 
equipment, so that the aggregate of such cost may be easily obtainable at any time. 


Further subdivisions: 


MACHINERY 

ELECTRICAL APPARATUS 
OVENS AND FURNACES 
POWER PLANT EQUIPMENT 


ae ten 


Note 1. The last subdivision is for companies who wish to combine 
under one head the entire investment in power plant equtp- 
ment. 


b. Machinery—foundations and installation 


(1) First cost of foundations for all machinery and apparatus not embraced under the 
following accounts: 


‘““Ovens and furnaces’”’ (No. 1-C-a-3.) 

“Heating and ventilating” (No. 1-B-d-1.) 

‘Power plant equipment”’ (No. 1-C-a-4.) 

“Railway tracks and overhead equipment” (No. 1-F-a-1.) 





Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 8 FOURTH EDITION 





Note 1. Does not include cost of steel floor plates which form a part of building floors, 
but do not serve as foundations for any specific machines. (See account 
No. 1-B-a-1.) 

Note 2. The cost of removing old foundations preparatory to the installation of new 
ones; also the cost of new foundations, when the location of machinery, tools 
or equipment is changed, and the cost of repairing foundations are chargeable 
to indirect manufacturing expenses, account No. 461. 


(2) First cost of installation, including engineering, labor and material, of all machinery 
as defined under account No. 1-C-a-1. 


Note 1. Cost of installing electrical apparatus is chargeable to account No. 1-C-c-2. 


Nove 2. As far as practicable the cost of old foundations and installation shall be 
removed from this account in accordance with the method prescribed 
for the dismantling and removal of other equipment. (See Section 4.) 


Further subdivisions: 
1. FOUNDATIONS FOR MACHINERY AND APPARATUS 
2. INSTALLATION OF MACHINERY 


c. Semi-durable tools and instruments 


(1) First cost, including cost of installation, of the smaller and less itnportant tools and 
equipment of a portable character (other than those for power plants), which have a 
comparatively long term of effective life, such as small portable power tools, comprising 
pneumatic hammers, drills, chippers, riveters, etc., electric drills, grinders, etc., and 
motors inseparably connected to such tools; also of small hand power bench tools, such 
as card and paper cutters, and tinsmiths’ tools, including crimpers and folders, etc. 


The following list indicates the class of tools, etc., that come under this definition: 


Anvils Gauges, all kinds 

Barrows, 3-wheel Grinders, portable electric 
Blocks, chain Grinding machines for 
Blocks, iron snatch commutators 

Blueprint machines Hammers, chippers, portable 
Boring bars pneumatic 

Box tools Hoists, chain 

Cameras (large) . Hoists, differential 

Carts, hand Hoists, pneumatic 

Chippers, pneumatic Jacks, screw and hydraulic 
Chucks Keyseating machines, parts of: 
Cooling plates for hydraulic presses cutters and cutter bars, 
Die heads, automatic bushings and keyways 
Drills, breast, portable electric Ladles, foundry, not geared 
Drills, breast, portable pneumatic Magnets, lifting 

Drills, ratchet Meters, steam, gas and water 
Dynamometers, mechanical Micrometers 

Electric tools, portable Pinion pullers 


Face plates Pyrometers 





Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 


FOURTH EDITION 


Page 9 





Pneumatic tools, portable 
Rammers, portable pneumatic 
Revolution counters 
Riveters, portable pneumatic 
Rolls, hand bending 

Scales, counter 

Screw drivers, bench, power 
Slide rests 

Soldering coppers, electric 
Speed recording devices 
Stands, winding 

Steam flow meters 

Stop watches 

Surface blocks 

Surveyor’s instruments 
Tachometers 

Tackles, chain and rope 


Tapping heads 
Tapping machines 
Templates 
Tension devices for 
machine tools, etc. 
Tripods for armatures 
Trucks, hand, 2, 3, 4, 6, wheel 
(not for track use) 
Vises, bench 
Vises, drill press 
Watches, stop 
Wheelbarrows, 3-wheel 
Winches, hand 
Winding forms (standard) 
Winding stands 
Windlasses for turning armatures 
Wood trimmers,bench 


(2) First cost, including cost of installation, of all electrical equipment not embraced under 
account No. 1-C-a-2—“‘Electrical apparatus” (other than that for power plants), 
such as motors of less than 4 h.p. capacity; transformers, induction regulators, etc., of 
less than 20 kw. capacity; meters, instruments, rheostats, starting boxes, arc lamps, 
etc.; testing room equipment, such as testing tables, switchboards, etc., also equipment 
for motor drives. The cost of installing all electrical apparatus should be charged 


to this account. 


The following list indicates the class of equipment that comes under this definition: 


Accumulators (storage battery) 
Ammeters . 
Arc lamps 

Batteries, storage 

Boxes, resistance - 

Boxes, plug 

Boxes, shunt 

Bridges, resistance 

Circuit breakers 

Coils, induction 

Coils, reactance 

Coils, testing 

Compensators 

Current indicators and meters 
Dynamometers, electro 
Galvanometers 


Generators below 14 kw. capacity 

Indicators, current, potential, etc. 

Instruments, electrical, all kinds 

Lanterns or projectors, electric 

Lightning arresters 

Measuring sets, resistance, 
capacity, etc. 

Meggers 

Meters, electrical, all kinds 

Motors, below 14 h.p. capacity 

Multipliers 

Ohmmeters 

Oscillographs 

Panels, switchboard (costing less 
than $200 each) . 





Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry 





Page 10 FOURTH EDITION 
Panels, starting Starting boxes and panels 
Potentiometers Switchboards 
Rectifiers Switches, lever, oil, etc. 
Regulators, induction, Testing room equipment 
below 20 kw. capacity and installation 
Relays Transformers below 20 kw. capacity 
Rheostats, field, motor Voltmeters 
starting, etc. Wattmeters 
Shunts Water boxes or rheostats 


Sounders, telegraph 


(3) Estimated or appraised value of a working supply of molds, jigs, punches, dies and special 
tools. Expenditures for renewals are chargeable to Development and complaints. (See 
paragraph A, Section 2, page 4.) 


Note 1. ‘“‘Special’”’ tools referred to in preceding paragraph are those designed especially 
for specific types of standard product, and the use of which is dependent upon a 
continuation of the practices under which they are employed. 


(4) First cost of all metal and snap flasks, also metal arbors and cores. 


Note 1. Replacements are chargeable to indirect manufacturing expenses, account 


No. 460. 
Further subdivisions: 
1. SEMI-DURABLE TOOLS 
2. ELECTRICAL EQUIPMENT 
3. MOLDs, JIGS, PUNCHES, DIES AND SPECIAL TOOLS 
4. METAL FLASKS 


D. PATTERNS AND DRAWINGS 


Sub-accounts: 
a. Patterns 


Estimated or appraised value of a working supply of patterns. Expenditures 
for renewals are chargeable to Development and complaints. (See paragraph A, 
Section 2, page 4.) 


b. Drawings 
Estimated or appraisal value of drawings. Expenditures are chargeable to Develop- 
ment and complaints. Blueprints chargeable to account No. 240. (See Section 2, 
page 12.) 


Note 1. Do not include the cost of patterns and drawings for machinery or other 
equipment to be used for manufacturing purposes. The cost of these 
patterns and drawings is chargeable to the specific account to which the, 
machinery, etc., is chargeable. 


E. FURNITURE, FIXTURES AND APPLIANCES 


First cost, including cost of installation, of permanent shop fixtures, including shafting; also of 
factory office furniture and substantial office appliances. 





Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 
FOURTH EDITION Page 11 





a. Shop fixtures and equipment Sub-accounts: 


First cost, including cost of installation, of permanent shop fixtures and equipment, 


such as: 

Stock room fixtures Additions to crane runways after 
Tanks completion of buildings 

Vats Intercommunicating telephone 
Shop boxes systems for shop use 

Sawdust ducts Electric time recording systems 
Work benches Firearms 

Racks Wooden partitions and enclosures 
Bins in shop buildings 

Cupboards Shafting (main line and counter- 
Platforms shafting), hangers, pulleys, line 
Lockers shaft couplings, clutches 

Oil feeds for tools (when not attached to machines) 
Water feeds for tools collars, drip cups, drip pans, 
Portable iron ladders oil cups, etc., also belting and 
Protection against dangerous places belt lacing 


Note 1. Does not include cost of countershafting which is usually bought as part of 
machines. (Seeaccount No. 1-C-a-1.) 
Note 2. Includes cost of wiring, inside and outside of buildings, for telephone. 
b. Furniture and appliances in factory offices 
First cost, including cost of installation, of furniture and expensive and substantial 
office appliances placed in factory offices, such as: 


Furniture 

Awnings Clothes trees Filing cases Shades, window 
Benches Cupboards Floor coverings Shelves 
Bookcases Desks Lamps, desk Stools 
Chairs Fans, electric, desk Lockers Tables 
Clocks and ceiling Racks for books Water coolers 

Siices Appiianses Safes Window poles 
Adding machines Clock dating stamps - Phonographs 
Addressographs Drawing-boards and tables Punches (for electrical 
Calculating machines Duplicators (expensive ones only) tabulating machines) 
Copy presses Numbering machines Typewriters 


Pneumatic tube systems, including tubes, whether above or below ground, station 
fixtures for receiving and sending, tube supports and excavations for underground 
tubes, but not compressors which are chargeable to account No. 1-C-a-1. 
c. Fire protective apparatus 
First cost, including cost of installation, of all fire protective apparatus, such as: 
Fire alarm systems 
Watchmen’s clock systems 
All fire protective apparatus (including hook and ladder trucks, hose wagons, hose 
lines, nozzles, play pipes and chemical extinguishers). 
Note 1. Includes cost of wiring, inside and outside of buildings, for fire alarm and 
watchmen’s systems. 


Section 3 


Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 12 


FOURTH EDITION 





F. OTHER EQUIPMENT 


(1) First cost, including cost of foundations and installation, of all permanent railway 
tracks in shops (other than power plants) and yards, whether standard or narrow gauge; 
of turntables and tracks on and under them; also of the overhead equipment of factory 
electric railways, such as poles, trolley wires, guy wires, insulators, crossovers, brackets, 
suspensions, etc.; also first cost of all permanent additions to such equipment. 


Note 1. Does not include cost of tracks and runways for cranes. (See accounts 
Nos. 1-B-a-1, 1-B-b-1 and 1-E-a.) 


Note 2. Includes cost of tracks on trestles, but does not include the cost of trestles. 
(See account No. 1-B-b-1.) 


(2) First cost of steam and electric locomotives, steam shovels and locomotive cranes; 
flat, box, dump and push cars, trucks and trailers, operated on yard and shop (except 


power plant) standard and narrow gauge tracks; also of all motors and accessories 
attached to them. 


(3) First cost of all conveyances and their equipment not otherwise provided for (except 


those chargeable to power plants); such as automobiles of all kinds, carts, trucks, 
wagons and stone boats; also cost of horses. 


Note 1. Does not include cost of hook and ladder trucks or hose wagons. (See 
account No. 1-E-c.) 


Further subdivisions: 
1. RAILWAY TRACKS AND OVERHEAD EQUIPMENT 
2. ROLLING STOCK 
3. AUTOMOBILES AND OTHER CONVEYANCES 


G. UNFINISHED PLANT 


The cost of new buildings and their fixed equipment, such as inside piping and wiring, 
heating and ventilating, water, sewer and drain pipes; also catalogued equipment for 
such new buildings, temporarily carried in this account until such time as new build- 
ing is completed and occupied when the charges should be classified and transferred 
to the proper manufacturing plant accounts. 


Further subdivisions: 
1. BuUuILDINGS 
2. MACHINERY AND TOOLS 
3. FURNITURE, FIXTURES AND APPLIANCES 


Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 


FOURTH EDITION Page 13 





e. 


2. PROPERTY OTHER THAN MANUFACTURING PLANT 


Sub-accounts: 


Land 
Purchase price of land not used for manufacturing purposes, together with all costs 
and expenses incurred in acquiring it. 

Buildings 


First cost of all buildings and permanent additions thereto used for administrative 
or commercial purposes, including cost of excavations, foundations and grading and 
all permanent piping, wiring and fixtures which form an integral part of such buildings. 


Tools and instruments 


First cost of new tools, instruments and other implements used by employees of 
general administrative and commercial offices, district and local offices and ware- 
houses and branches other than factortes and repair shops. 


Office furniture and appliances 


First cost of all new furniture, appliances, fixtures, partitions, etc., (such as are listed 
below), for general administrative and commercial offices, district and local offices 
and warehouses and branches other than factories and repatr shops. 


Awnings Floor coverings 
Adding machines Hat racks 
Addressographs Lockers 
Bookcases Numbering machines 
Benches Phonographs 
Cabinets (portable) Punches (for electrical 
Calculating machines tabulating machines) 
Chairs Racks for books 
Clock dating stamps Safes 
Clocks Shades 
Clothes trees Stools 
Copy presses Tables 
Cupboards Telephones—‘‘interior”’ 
Desks systems (if owned) 
Drawing-board stands Typewriters 
Duplicators (expensive ones only) Water coolers @ 
Fans, electric Window poles 
Filing cases 

Vehicles 


First cost of all automobiles, wagons and other vehicles, also of horses, used by 
employees of general administrative and commercial offices, district and local offices 
and warehouses and branches other than factories and repatr shops. 





Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 14 FOURTH EDITION 





f. Repair shop equipment 


First cost of new machinery, tools, instruments and other implements, also of furniture, 
appliances, automobiles, wagons and other equipment, used by repair shops which are 
not located at factories. 


3. INVESTMENT SECURITIES 


Cost, or book value, of stocks and bonds of controlled or associated and other companies, also of 
mortgages and long term notes held or acquired as investments; but not including United States 
and other domestic Government securities for which there is a ready market. The latter should 
be carried as current assets. 


Optional sub-accounts: 
a. Securities of controlled or associated companies 


1. Stocks and bonds 
2. Mortgages 
3. Long term notes 


b. Other securities 


1. Stocks and bonds 
2. Mortgages 
3. Long term notes 


4. MATERIALS: RAW, FINISHED AND IN PROCESS 


Book value of raw, partly finished and finished materials located in factories and branch ware- 
houses, on consignment and in transit between factories and warehouses. Also, the cost of 
apparatus and material, labor and expense incurred in its installation on the premises of cutomers, 
prior to the completion and billing of such work. 


It is desirable that at least the following sub-accounts shall be kept. 


Sub-accounts: 
Factory raw materials and supplies 
Factory work in process 
Factory finished stocks 
Warehouse stocks 
Goods in transit 
Consignment stocks 
Installation work in progress 


RImoBooD 


5. NOTES RECEIVABLE 


Face amount of short term notes and trade acceptances owned by the company and not dis- 
counted. 


6. CUSTOMERS’ ACCOUNTS 


Unpaid balances in open accounts against customers only. 





Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 
FOURTH EDITION Page 15 





7. OTHER ACCOUNTS RECEIVABLE 


a. Advances to subsidiary companies 
Unpaid balances on notes of subsidiary companies. 


Note 1. Open account balances for regular product of the parent company should 
be carried in account No. 6, ‘‘Customers’ accounts.”’ 


b. Guarantee deposits 
Certified checks deposited with bids, etc. 


c. Cash advances 
All temporary and standing cash advances to employees account of traveling and other 
expenses, when such advances are to be accounted for at a later date. 


d. Accrued interest and dividends on securities owned 
Interest receivable on bonds of other companies, accrued in monthly proportions. 


Note 1. Dividends on stocks of other companies should not be accrued, unless 
declared. 


e. Sundry debtors 
Debit balances against other than customers, when representing other than charges 
for material sold. 


8. GOVERNMENT SECURITIES 
Cost, or book value of United States and other domestic government securities, for which a ready 
market 1s avatlable. 

Note 1. There may be other domestic securities owned by the Company for which 
there is a ready market, but it is regarded as more conservative to confine 
this account to government securities which can be immediately converted 
into cash. 

9. CASH 
Aggregate of cash on deposit with banks, also petty cash funds in the hands of the Treasurer, 
paymasters and cashiers of branch offices. 


10. SINKING AND OTHER FUNDS 
Moneys invested for specific purposes, such as the redemption of bonds or notes. The account 
may be subdivided, if necessary. 
11. GOOD WILL 


Amounts paid, either in cash or securities, in acquisition of the good will of the business. 
12. PATENTS, FRANCHISES AND LICENSES 
Cost of patents, rights, franchises and other privileges. (See ‘‘Development and complaints.’’) 


Note 1. This account should be liquidated over the life of the patents, franchises and 
other privileges. 





Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 16 FOURTH EDITION 


13. DEVELOPMENT AND COMPLAINTS 


Includes expenditures as defined under this head in Section 2, page 4, less amounts written off or 
liquidated into manufacturing cost as per Section 4, page 14. 


14. SUNDRY DEFERRED CHARGES TO OPERATIONS 


All other disbursements of an expense nature, which apply to periods subsequent to the month 
in which they are made; such as the cost of improving leased property; insurance, taxes and rent 
paid in advance; discount and expenses on note issues; etc. 


Note 1. Disbursements charged to this account shall be liquidated by monthly trans- 
fers to the respective accounts during the proper period. 


Note 2. Sub-accounts may be kept if desired. 


Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 
FOURTH EDITION Page 17 





Liability accounts 


15. FUNDED DEBT 
Face value of bonds or mortgages outstanding; also notes drawn for more than one year. (It 
would be well to describe and give due date of each issue). 
16. NOTES AND ACCEPTANCES PAYABLE 


Face value of all outstanding current notes and acceptances of the Company, drawn for one year 
or less. 


17. ACCOUNTS PAYABLE 


Unpaid audited invoices covering purchases of materials, payrolls and expense items. 


18. ACCRUED TAXES 


Accrued taxes not payable until some subsequent date. 


19. ACCRUED CHARGES 


Accrued expenses not payable until some subsequent date, such as commissions, royalties, etc. 


20. DIVIDENDS DECLARED AND UNPAID 


Dividends declared upon the Company’s outstanding stock, remaining unpaid. 


Note. 1. This account will be credited as of the date of declaration, with the amounts of dividends 
declared, and will be charged with the actual dividend disbursements, when made. 


21. INTEREST ACCRUED 


Interest accrued upon bonds, notes and other indebtedness of the Company. 


Note 1. This account will be credited monthly with one-twelfth of the annual interest payable 
on bonds, etc., and will be charged with disbursements for such interest. 


22. ADVANCE COLLECTIONS ON SALES 
Cash, notes or other settlements received account of contracts and sales, prior to the entry of the 
billing against the customers. 


23. PLANT DEPRECIATION ENTERED IN COSTS 


Amount of estimated depreciation charged monthly to indirect manufacturing expenses, accounts 
Nos. 324 and 384. 


Note 1. The amounts credited to this account will not be transferred to ‘‘Manufacturitig 
plant’’ account but will appear on the balance sheet as a deduction from that account. 





Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 18 FOURTH EDITION 





24. DEPRECIATION ON PROPERTY OTHER THAN MANUFACTURING PLANT 
Amounts set aside to cover depreciation on property other than manufacturing plant. 
Note 1. The amounts credited to this account will not be transferred to ‘Property 
other than manufacturing plant’’ account but will appear on the balance 
sheet as a deduction from that account. 


25. WORKING RESERVES 

Amounts set aside to cover reserves for anticipated expenses and losses, before such expenses 

and losses can be determined. 

a. Reserve for factory inventories 
This account will be credited with amounts entered into costs to cover possible short- 
ages which, it is expected, may develop when the physical inventories are taken; also 
amounts which may be considered necessary to offset possible errors and over-valua- 
tions in such physical inventories (see Section 2, page 5). 

b. Reserve for warehouse and consigned stocks 
This account will be credited with estimated shortage which may be expected to 
develop from physical inventories of warehouse stocks other than at factories (see 
account ‘‘Accrual against possible losses’’ in Section 3, page 27). 
This account will be charged with the amount of adjustment necessary in account No. 
4-d asa result of physical inventories. 

c. Reserve for development and complaints 
This account will be credited periodically with an amount sufficient to cover those 
items of development, tools and complaint expenditures open in account No. 13 the 
liquidation of which is doubtful either because of the curtailed production of the 
specific device or because of possible discontinuance of such production. 

d. Reserve for loss on notes and accounts receivable 
This account will be credited with the estimated loss on doubtful notes, bills, accep- 
tances, and accounts receivable as charged to ‘‘Accrual against possible losses,’’ 
Section 3, page 27. 

e. Reserve for miscellaneous losses 
This account will be credited with the estimated anticipated losses of a miscellaneous 
character, when chargeable to ‘‘Accrual against possible losses,’’ Section 3, page 27. 


26. CAPITAL STOCK 
Par value of shares of capital stock outstanding per stock transfer books. Separate accounts are 
to be kept for common and preferred stocks. 


27. CONTINGENCY RESERVES 
For amount set aside out of surplus to provide extraordinary reserves for contingencies. 
a. On manufacturing plant 
b. On patents and franchises 
c. For other purposes 
28. SURPLUS 


The undivided profits (or the loss) to date. 





Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 
FOURTH EDITION Page 19 





Summary of financial operations — accounts 


30. NET SALES BILLED 


This is not a ledger account, but an item in the summary of financial operations. It is obtained 
by deducting from ‘‘Gross sales billed”’ the total of the charges in the four sub-accounts. 


Gross sales billed Sub-accounts: 


Total sales billed, including corrections. 
Returned goods 

This account will be charged with allowances made to customers for goods returned. 
Quantity discounts 

Discounts earned by customers by reason of quantity purchases. 
Cash discounts allowed customers 

All allowances made to customers for prompt payment of accounts. 


31. COST OF SALES BILLED 


Manufacturing cost or purchase cost of ‘‘Gross sales billed,’’ less credits to cost of sales for goods 
returned. 

It is contemplated that the manufacturing cost of individual shipments will be determined in 
accordance with the procedure outlined in Section 4 and that account No. 4, ‘Materials: raw, 
finished and in process,”’ will be credited and this account debited with the manufacturing cost 
for each shipment as billed. When bills are rendered either in advance of shipment or prior to 
the determination of manufacturing cost for such shipment, this account is to be debited and 
““Merchandise”’ credited with the estimated cost pending shipment or determination of actual 
cost, at which time adjusting entry is to be made for the difference between the estimated and 
actual cost. 


32. GENERAL EXPENSES 


Salaries and all other expenses of administrative and sales departments, in accordance with 
titles and definitions of sub-accounts, as given in Section 3, pages 21, 22, 23, 24, 25 and 26. 


33. OTHER INCOME 
All income from sources other than the sale of the Company’s products. 


: Sub-accounts: 
a. Income from investments 


Interest accrued and received and dividends received on securities of other companies. 
b. Interest on notes and accounts receivable 
Interest accrued or received on short term notes, acceptances and accounts. 
c. Other income 
All income other than sales, which is not provided for above, such as profit from sales 
of securities, royalties received, commissions received, also rentals received from 
property not used for manufacturing purposes, less taxes, depreciation and other 
expenses paid account of such property, etc. 





Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 20 FOURTH EDITION 


34. INTEREST PAID AND ACCRUED 


Interest paid or accrued on outstanding bonds, mortgages, notes, trade acceptances and other 
accounts payable. 


a. Interest on funded debt 


b. Interest on other obligations 


35. FEDERAL INCOME TAX 


All amounts accrued for Federal income tax. 


39. DIVIDENDS 


Dividends declared upon the outstanding capital stock of the Company (see account No. 20.) 


Standard Accounting and Cost System—Electrical Manufacturing Industry  ~ 
FOURTH EDITION 


Section 3 
Page 21 





32. GENERAL EXPENSES 


(Expenditures chargeable to this account should be traced to individual departments, as far as 
possible.) 


The classification is divided into three sections, viz.: “distribution expenses,’’ ‘‘administration 
expenses ’’ and “‘non-departmental expenses,”’ the purpose being to collect in the group of “dis- 
tribution expenses”’ the cost of distribution of the product of the company as distinguished from 
the producing and administrative functions. 


In general, it may be considered that ‘‘distribution expense”’ begins when the product is turned 
over by the factory to a warehouse or to the transportation company for delivery either to a 
warehouse or for direct shipment to a customer. ‘‘ Distribution expenses,’’ therefore, include all 
expenses incidental to the placing of the requisition or authorization of manufacture; warehous- 
ing, advertising, selling, shipping, billing and collecting of customers’ accounts. 


“Administration expenses” include the expenses of departments, whose responsibilities are not 
restricted to either the manufacturing or selling operations, but are of an administrative 
character relating to the business as a whole. 


‘‘Non-departmental expenses’’ are described on page 27 of this section. 


Similar accounts for distribution and administration expense bear the same number. “‘ Distribu- 
tion expense’’ account numbers are prefixed by the letter ‘‘D’”’ and ‘“‘administration expense’”’ 
account numbers are prefixed by the letter ‘“‘A.”’ Read both the ‘“‘D” and ‘‘A”’ description before 
determining allocation. 


For the purposes of control, it may be advisable to charge all expenses of a similar nature to the 
same account with a subdivision to ‘“distribution”’ and ‘“‘administration.”’ 
SALARIES 


Smaller companies may find it inexpedient to maintain these several salary accounts. Where 
desirable, all the salaries may be distributed to one account with subdivisions to “‘distribution”’ 
and ‘‘administration.”’ 


D-1 


Distribution expenses 


Salaries—officers and department heads 
Compensation for services of sales man- 
ager and his assistants, managers of 
sales divisions and sales offices, adver- 
tising manager and his assistants, man- 
ager of finished stock control depart- 
ment, managers of warehouses, general 
credit manager, manager of collection 
department and accounting executives 
in charge of customers’ accounts and 
other accounting of ‘‘distribution”’ de- 
partments. 


Administration expenses 


Salaries—officers and department heads 
Compensation for services of corporate 
and general executive officers and heads 
of regularly organized departments or 
divisions, except those included under 
“distribution” or those included in 
factory overhead. 





Section 3 


Page 22 


Standard Accounting and Cost System—Electrical Manufacturing Industry 


FOURTH EDITION 





Note: 


D-2 


D-3 


D-4 


Distribution expenses 


Administration expenses 


Compensation for services of officers and department heads whose duties are partly 
‘‘administration”’ and partly ‘‘distribution”’ will be divided in accordance with the facts. 
In instances where the administration duties are only incidental, the entire compensation 


is chargeable to ‘‘distribution.”’ 


Salaries—advertising department 


Compensation of all employees of ad- 
vertising department. 


Salaries—selling force 

Compensation including commissions 

paid in lieu of salaries for services of 

salesmen, inside salesmen, specialists, 

solicitors and demonstrators; also all 

fees and commissions, allowed agents 

and others, even if specifically included 

in the selling price. 

Note 1: Specialists are those spe- 
cially trained from a technical stand- 


point or in connection with certain- 


lines of product, and who direct and 


assist regular salesmen and solicitors © 


and consult with and advise cus- 
tomers. 


Note 2: Salesmen, or solicitors are 
those who promote the sale and use 
of the Company’s product through 
personal solicitation with buyers, 
orders being placed direct or through 
contractors, jobbers or dealers. 

Note 3: Demonstrators are those 
regularly engaged in demonstrating 
the Company’s product in promotion 
of sales. 


Salaries—finished stock control depart- 


ment 


D-5 


Note 1: 


Note 2: 


Compensation of employees of this 
department. 


Salaries—clerical employees 
Compensation of service clerks, and 
other clerks, stenographers, typists, 
phonograph operators, and telephone 
switchboard and telegraph operators, 
etc., employed in departments having 
distribution functions. 


Salaries—clerical employees 
Compensation of services of all clerks, 
stenographers, typists, phonograph 
operators, and telephone switchboard 
and telegraph operators, etc., employed 
in departments having administration 
functions. 


Compensation of telephone switchboard and telegraph operators will be divided between 


‘‘distribution”’ and ‘‘administration”’ expense in the same proportion as telephone and 
telegraph expense (D-15 and A-15) respectively. 


If an employee devotes part time to ‘‘distribution’”’ and part time to ‘‘administration”’ 


duties, compensation will be divided in accordance with the facts, but no division need 
be made where the duties are merely incidental. 





Standard Accounting and Cost System—Electrical Manufacturing Industry 


FOURTH EDITION 


Section 3 
Page 23 





D-6 


D-7 


Distribution expenses 


Salaries—warehousing 
Compensation of employees of ware- 
houses. 


Salaries—credit and collection em- 


ployees 


D-8 


Compensation of employees of credit 
and collectiondepartment. (Whencredit 
and collection work is part of the func- 
tions of the general treasury or general 
accounting department, thus making 
correct segregation of salary expense 
for these employees difficult or impos- 
sible, this class of expense may be 
included under A-7 or A-8 respectively.) 


Salaries—billing and distribution ac- 


counting department 


Note: 


D-11 


Compensation of employees engaged 
exclusively in accounting connected 
with the merchandising and distribution 
activities of the Company, such as ac- 
counting for the sale and distribution 
of the Company’s product, as well a: 
the purchase and sale of material ob- 
tained from other vendors; also for the 
expense incident to such activities as 
incurred by the respective sales and 
distribution departments. 


Administration expenses 


A-7 Salaries—general treasury department 
Compensation of all employees of the 
general treasury department. 

A-8 Salaries—general accounting depart- 

ment 


Compensation of employees in the gen- 
eral accounting department. This does 
not include compensation of those com- 
ing under D-8 classification or those 
engaged in manufacturing accounting. 


These expenditures may be included under A-8 when this class of accounting is per- 
formed in the general accounting department and when, therefore, a correct segregation 


of salary expense is difficult or impossible. 


Salaries—engineers 

Compensation for services of engineers 
in general and local offices, not con- 
nected with the design of apparatus for 
manufacture, nor inspection of such 
apparatus, nor the studying of technical 
questions to be embodied in future 
manufacture, nor the supervising of 
installation and construction. It does 
include the examination of contracts 
and the adjustment of complaints by 
engineers, work of engineers on specific 
sales propositions which cannot be 
charged to costs. All engineering not 
charged to D-9 will be included in the 
cost of sales. 


Salaries—other employees 
Compensation for services of office 
boys, messengers, office equipment 
repairmen, janitors, cleaners, elevator 
operators, watchmen, laborers, etc., 
employed in the distribution depart- 
ment. 


A-10 Salaries—general legal department 


A-11 


Compensation for services of all em- 
ployees of general legal department. 


Salaries—other employees 
Compensation for services of office 
boys, messengers, office equipment re- 
pairmen, janitors, cleaners, elevator 
operators, watchmen, laborers, etc., 
employed in the administration de- 
partment. 


ES SS a 


Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 24 FOURTH EDITION 





OTHER EXPENSES 


Smaller companies may find it inexpedient or inadvisable to maintain all of these account divisions, 
in which case the following combinations may be made, always, however, maintaining the sub- 
divisions ‘‘distribution’’ and ‘‘administration.” 


Distribution expenses Administration expenses 


Combine D-13 with D-22. Combine A-13 with A-22. 
Combine A-16 with A-17. 
Combine A-21 with A-22. 


D-12 Rent, light, heat and power A-12 Rent, light, heat and power 
Rental for space occupied by sales, Rental for space occupied by corporate 
advertising, finished stock control, and general executive officers and their 
warehouse, credit, collection, billing departments and regularly organized 
and distribution accounting depart- departments or divisions except those 
ments; taxes and insurance on such included under “‘distribution”’ or those 
rented property; expenses of light, heat included in factory overhead; taxes 
and power not included in rental and insurance on such rented prop- 
charges. erty; expenses of light, heat and power 


not included in rental charges. 


Note: Where “distribution” and ‘‘administration’’ offices occupy the same building or suite, 
distribution will be made on the basis of floor space with a differential where desirable, 
for rental value of different floors. 


D-13 Office equipment alterations, repairs A-13 Office equipment alterations, repairs 
and replacements and replacements 

Cost of repairing and partially renew- Cost of repairing and partially renew- 
ing furniture and appliances, and alter- ing furniture and appliances, and alter- 
ing or removing partitions, railings, ing or removing partitions, railings, 
shelving and other permanent building shelving and other permanent building 
fixtures devoted to the use of sales, fixtures devoted to the use of cor- 
advertising, finished stock control, porate and general executive officers 
warehouse, credit, collection and bill- and their departments and other de- 
ing and distribution accounting de- partments or divisions except those 
partments. Also pro-rata share of included under “‘distribution”’ or those 
cost of repairing or partially renewing included in factory overhead. Also 
any buildings occupied by members of pro-rata share of cost of repairing or 
these departments. partially renewing any buildings oc- 
cupied by members of these depart- 

ments. 


Note: When large unusual expenditures are incurred in altering, remodeling or re-equipping 
offices such expenditures should be charged to ‘‘deferred charges to operations’’ and 
liquidated in monthly installments against this account during a period not to exceed 
twelve months. 


D-14 Traveling and entertainment A-14 Traveling and entertainment 
Payments for transportation, hotel Payments for transportation, hotel 
and other necessary expenses of travel and other necessary expenses of travel 
and expenses of entertaining customers and expenses of entertaining cus- 
or others, incurred by employees whose tomers or others, incurred by em- 
salaries are charged to distribution ployees whose salaries are charged to 


expense. administration expense. 





Standard Accounting and Cost Sysiem—Electrical Manufacturing Industry 


FOURTH EDITION 


Section 3 
Page 25 





Note: 


D-15 


Note 1: 


Note 2: 


Note 3: 


D-16 


Distribution expenses 


Administration expenses 


Traveling expenses incurred by departments and sales office managers or others whose 
duties are divided between distribution and administration will, when possible, be divided 
between ‘‘distribution’’ and ‘‘administration”’ expenses in accordance with the nature 
of each trip otherwise on the same basis as salaries. 


Telephone and telegraph 

Cost of local and long distance tele- 
phone and telegraph service for de- 
partments whose salaries are charged 
to distribution expense. 


A-15 


Telephone and telegraph © 
Cost of local and long distance tele- 
phone and telegraph service for de- 
partments whose salaries are charged 
to administration expense. 


Long distance telephone calls and telegraph messages are readily identified and will 


be charged direct; local telephone service, switchboard rentals, etc., will be divided 
on the basis of the number of telephone instruments in use; rentals paid for leased 
wires will be divided on an arbitrary basis to. be checked by occasional tests. 


Small companies, where subdivisions as outlined in Note 1 are impracticable, may 


charge all local service and switchboard rentals, etc., to A-15. 


D-5 or A-5. 


Postage 

Cost of all postage used by depart- 

ments whose salaries are charged to 

distribution expense except parcels 
post on shipments of goods to cus- 
tomers. 

Note: Where desirable this account 
can be subdivided to show sepa- 
rately, advertising postage and other 
postage. 


Stationery and office supplies 

Cost of stationery and minor supplies 

and conveniences for the use of de- 

partments whose salaries are charged 

to distribution expense. 

Publicity expense 

(a) Space advertising 

Cost (except salaries and postage) of 

space advertising in newspapers, pe- 

riodicals, trade publications, ete. 

(b) Other publicity 

Cost of catalogs and publications (in- 

cluding postage and other forwarding 

charges thereon), novelties of an ad- 

vertising character, signs, exhibits, etc. 

Note: Cost of catalogs may be charged 
to this account in total or on a 
monthly accrual basis. 


Compensation to telephone switchboard and telegraph operators will be charged to 


A-16 Postage 


A-17 


Cost of all postage used by depart- 
ments whose salaries are charged to 
administration expense. 


Stationery and office supplies 

Cost of stationery and minor supplies 
and conveniences for the use of de- 
partments whose salaries are charged 
to administration expense. 





Section 3 


Standard Accounting and Cost System—Electrical Manufacturing Industry 





Page 26 FOURTH EDITION 
Distribution expenses Administration expenses 
D-19 Taxes A-19 Taxes 
Payments or monthly accruals of Payments or monthly accruals of 
taxes on real or personal property or taxes on real or personal property or 
other state, county or municipal taxes, other state, county or municipal taxes, 
except those paid on account of rented except those paid on account of rented 
property (D-12) in so far as such property (A-12) in so far as such taxes 
taxes are properly apportioned to the are properly apportioned to the admin- 
distribution department. istration department. 
D-20 Insurance A-20 Insurance 

Premiums paid or monthly accrual for Premiums paid or monthly accrual for 
insurance of offices and warehouses insurance of offices and their contents, 
and their contents, except those paid except those paid on account of rented 
on account of rented property (D-12) property (A-12) in so far as such pre- 
in so far as such premiums are prop- miums are not properly apportioned to 
erly apportioned to the distribution either the distribution department or 
department. manufacturing cost. 

A-21 Contributions (not deductable from 

income for federal tax purposes) 

Contributions or gifts for charitable, 

welfare, educational, religious, etc., pur- 

poses, not specifically for the benefit 
of the donor or its employees. 

Note: Contributions made by a cor- 
poration for purposes connected with 
the operation of its business, when 
limited to charitable institutions, 
hospitals, or educational institu- 
tions conducted for the benefit of 
ats, employees or their dependents, 
will be charged to A-22. 

D-22 All other expenses A-22_ All other expenses 


Incidental or special expenses which 
are chargeable against “distribution 
expenses’’ and are not otherwise pro- 
vided for in this classification, such as 
street car fares, losses due to errors 
of the selling force, collection fees, 


EtG 


Incidental or special expenses which 
are chargeable against ‘‘administra- 
tion expenses’’ and are not otherwise 
provided for in this classification, such 
as street car fares, advertising for help, 
premiums on surety bonds, losses due 
to errors of administrative force, 
directors’ fees, etc. Also contributions 
deductable from income for federal 
tax purposes, as outlined in Note 


“under A-21. 





Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 
FOURTH EDITION Page 27 





Non-departmental expense accounts 


This group of general expense accounts is chargeable with expenditures which, by reason of 
their character, cannot be assigned to specific departments. 


a. Corporate taxes . 
All state and municipal taxes on income, capital invested and personal property other 
than manufacturing plant; also federal taxes except those on income. 


Note 1. Taxes levied on income, in lieu of personal property taxes, are chargeable to 
sub-account No. 32-A-19. 


Note 2. Federal income tax is chargeable to surplus. 


b. Patent litigation 
Expenditures in connection with prosecutions of patent suits, also payments in. sat- 
isfaction of judgments for infringements on patent rights (when traceable to the 
specific lines to which such judgments relate, the payments are chargeable to develop- 
ment and complaints). (See Section 2, page 4, sub-division A.) 


c. Royalties 
All payments for royalties, when not traceable to a specific product. 


d. Pension and retirement payments 
All payments to employees under pension plans. 


e. Discount and other expense of bond and note issues 
Expenditures incurred and deductions allowed from face of bonds or notes in con- 
nection with their issue. 


f. Accrual against possible losses 
Amounts set aside monthly to provide reserves for losses on branch office stocks, 
consignments, accounts, notes receivable, bills, acceptances, etc. (Actual losses, when 
ascertained, are chargeable against the reserves thus created.) 

cana 

g. Concessions to customers 
All allowances to customers for claims, the justice of which is not admitted by the 
Company, which are conceded as a matter of business policy. When however depart- 
ment responsibility can be clearly established the allowance should be charged to the 
department involved. 


h. Unabsorbed transportation 
Transportation charges on shipments to branch warehouses and to customers when 
not collectable from customers or chargeable to specific accounts. 





Section 3 
Page 28 


Standard Accounting and Cost System-——Electrical Manufacturing Indusiry 
FOURTH EDITION 


Indirect manufacturing expense accounts 


The expenses of all productive and non-productive manufacturing departments are to be seg- 
regated according to the following classifications and definitions. Attention is directed to the 
fact that all expenses of certain departments, such as Purchasing, Receiving, Storekeeping, 
Shipping, etc., are to be accumulated in single accounts, and that a separate group of accounts 


is provided for all power plant expenses. 


Condensed accounts Sub-accounts 


201. 
| 200. Supervision. ... 
203. 


stenographers and boys a 


A. Miscellaneous 213. 


210. Clerical labor, including oa shel 
salaries and 

221. 

222. 

223. 

| 224. 

225. 

| 226. 

Were 


220. Other labor............. 


oo} 


241. 
242. 
243. 
244. 
245. 


B. Shop supplies... 240. Shop supplies.......... 


246. 


C. Unassignable 
freight express 
\ and cartage . 


250. Unassignable freight, ex-~ 
press and cartage..... 


202. 


Further subdivisions 


Factory supervision 
Foremen and assistants 
Inspectors 


Clerks in factory offices 
Material lists 
Employment bureau 


Elevator men and cranemen 
Watchmen, gatemen and ushers 
Cleaners, oilers and porters 
Railway crews 

Employees taking inventories 
Laborers 

Supplementary compensation 


Fuel consumed 

Water 

Lubricants 

Non-durable small tools 

Office supplies, stationery and 
printed forms 

Miscellaneous shop supplies 


Stendard Accounting and Cost System—~Electrical Manufacturing Industry 


FOURTH EDITION 





Sub-accounts 
261. 
262. 


260. Employees’ welfare...... 


Condensed accounts 


mR 
an 
s 


270. Accident compensation... 


280. Shop losses............. 


D. Sundry manufac- 
turing expenses 
290. Purchasing, receiving, fae 


storekeeping and ship- 
l 


ko} 
=o 
i=3 

ge 


300. Miscellaneous manu- 
facturing expenses...... 


w 
So 
a 


E. Fixed charges.... 320. Fixed charges........... 


Section 3 
Page 29 


Further subdivisions 


Sick relief 

Hospital service 
Employees’ death benefit 
Gratuities 

Restaurant 

Shop vacation allowances 
Other welfare expenses 


Defective workmanship 
Defective purchased material 
Other losses due to errors 


Purchasing department 
Receiving department 
Storekeeping department 
Shipping department 


Rearrangement of equipment 
Telegraph and telephone expenses 
Traveling expenses 

Fire department 

Garage and stables 

Shop electric plant 

Instruction of apprentices 
Unassignable testing expense 
Other manufacturing expenses 


Insurance 

Taxes 

Rentals 

Depreciation 

General office assessed charge 


Section 3 
Page 30 





Condensed accounts 


340, 


350. 


360. 


F. Power, heat and 
light generating 
and distributing 


370. 


380. 


G. Power, heat and (ee 


light purchased 


Standard Accounting and Cost System—Electrical Manufacturing Industry 
FOURTH EDITION 


Sub-accounts 


Operating labor......... 


SUppHGS es Gece 


Incidental operating 
expenses.............. 


Maintenance............ 


Fixed charges........... 


Power, heat and 
purchased............. 


Further subdivisions 


Supervision 
Clerical 
Other labor 


Fuel 

Water 
Lubricants 
Other supplies 


Small tools 
Stationery 
Other incidental expense 


Building 

Steam plant 

Engines and turbines 
Electrical plant 
Other maintenance 


Insurance 

Taxes 

Rentals 

Depreciation 

General office assessed charge 


Standard Accounting and Cost System—Electrical Manufacturing Industry 


FOURTH EDITION 


Section 3 


Page 31 





Condensed accounts Sub-accounts 





411. 
410, Land......0 0%, 4 { pete 
yop f 421. 
420. Buildings............. | 422. 
H. Maintenance of 431. 
ild- 432. 
and ang steld 430. Structures........... 
Ps ed wie ree 
434, 
440. Heating and ventilating 
and other piping and 
WINE: Wo 5. a. 441. 
| 442, 
(451. 
452. 
453. 
454, 
455. 
I. Maintenance of 450. Machinery, electrical yea 
machinery, tools apparatus, furniture ; 
and fixtures.... | and fixtures......... 458. 
459, 
460. 
461. 
| 462 
Mos tok SM ECCS {470. Patterng tv sb het ca 
patterns....... 
‘480. Automobiles and other 
KM aittenaits. ot conveyances......... 
miscellaneous 
equipment..... oak 


| 492. 


Further subdivisions 


Roadways and grounds 
Gardens and lawns 


Office buildings 
Other buildings 


Structures 

Water, drainage and sewer pipes (main 
trunk lines) 

Piping (main trunk lines) 

Electrical conductors (main trunk lines) 


Heating and ventilating 
Other piping and wiring 


Machine tools 

Semi-durable tools 

Elevators, cranes and conveyors 

Electrical apparatus and equipment 

Boilers, ovens and furnaces 

Shop fixtures and equipment 

Furniture and appliances in factory 
offices 

Fire protective apparatus 

Molds, jigs, punches, dies and special 
tools 

Metal flasks 

Foundations 

Shafting, belting and pulleys 


Railway tracks and overhead 
construction 
Rolling stock 





Section 3 Standard Accounting ond. Cost System—Elecirical Manufacturing Indusiry 
Page. 32 FOURTH EDITION 





Definitions of Indirect manufacturing expense accounts 
A. MISCELLANEOUS SALARIES AND WAGES 


Sub-accounts: 
200. Supervision 


(1) Salaries of managers and general superintendents, superintendents having supervision 


of more than one department, also production managers and head accountants of 
factories. 


(2) All payments for services of general foremen, general night foremen and foremen and 
assistant foremen in productive or non-productive departments. 


Note 1. This account is intended to include payments to supervising foremen only, 
i.e., those foremen whose time cannot be regularly distributed (not arbi- 
trarily pro-rated) entirely or partially to specific accounts or shop orders. 


Note 2. Wages of working gang bosses and leading hands who look after small groups 
of men whose wages are charged to one account, should not be charged to 


this account; charge them to same account to which the wages of the gang 
are charged. 


Note 3. Only men who are regarded competent to assume all the duties of foremen 
during the latters’ absence, should be classed as assistant foremen. 


(3) Wages of inspectors actually engaged in general inspection work. 


Note 1.. Do not include in this account wages of employees whose time is devoted 
exclusively to the examination of one class of product in the regular routine 
of its production, which are, therefore, chargeable, as productive labor, 
against that product. 


Further subdivisions: 


201. FacTORY SUPERVISION 
202. FOREMEN AND ASSISTANTS 
203. INSPECTORS 


210. Clerical labor (including stenographers and office boys) 


(1) Salaries or wages of factory office clerks engaged in general clerical service, such as 
executive, production, cost, accounting, piece rate, timekeeping and payroll clerks, 
etc., wherever located; also wages of that class of labor whose duties are partly manual 
and partly clerical, such as tallying lumber and other bulk material and supplies in 


yards and sub-storerooms, when they are not chargeable to receiving or storekeeping 
departments. 


Note 1. Does not include wages of employees in sub-storerooms, who receive and 
disburse material, tools, etc. (Seeaccount No. 226.) 





Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 


FOURTH EDITION 


Page 33 


LLL LLL LL LALA L LLL LLL ALLL LOL CLEC TLL LC ON ETE TTL LECCE COAT CENT TO ESATA LTTE 


(2) Wages paid draftsmen or clerks who prepare material lists. 


Note 1. When lists are prepared in the drawing room, the cost, including wages and 
indirect expense, should be transferred monthly to this account. 


(3) Wages of persons in charge of the employment bureau, or the proportion of their 


wages, representing time thus occupied; expense of advertising for help; time and 
expenses of men, while looking for workmen; allowances for expenses to men visiting 
factories, on invitation, to see about employment; and any other expense distinctly 
relating to the engagement of employees. 


Further subdivisions: 


211. CLERKS IN FACTORY OFFICES 
212. MATERIAL LISTS | 
213. EMPLOYMENT BUREAU 


220. Other labor 


(1) 


(2) 
(3) 


(4) 


(5) 


Wages paid for operating elevators, locomotive cranes and other cranes. 


Note 1. Wages paid chainmen who follow cranes, should be charged to account No. 
226. 


Wages paid watchmen, gatemen and ushers at office entrances. 


Wages paid for cleaning windows, closet porters in shops, sweeping and otherwise 
cleaning shops and departments; collecting and removing turnings, borings, punchings, 
trimmings, etc.; trucking and wheeling ashes, cinders and refuse from shops; also for 
oiling machinery, shafting, elevators, cranes, etc. 


Note 1. No portion of the wages of machinists, cranemen, etc., who oil the equipment 


incidental to their occupations, is chargeable to this account. 


Wages paid men engaged in operating electric locomotives, electric tramcars and 
steam locomotives used for transportation purposes within the factory. 


Extra wages paid clerks and others, while taking annual inventories or any special 
inventories of material, tools or supplies, as follows: 


Wages representing extra time allowed permanent force (clerical or manual) 
outside of regular hours. 


Wages paid extra help engaged for the purpose. 


Includes wages paid for listing, counting, etc., also for the subsequent computation 
of values. “ 


Note 1. Doesnotincludecost of printed forms, stationery, etc. (Seeaccount No. 245.) 





Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 34 FOURTH EDITION 





(6) Wages paid all miscellaneous and unskilled labor not otherwise provided for in this 
classification. 


Note 1. Includes wages of employees in sub-storerooms, who receive and disburse 
material, tools, etc. 


(7) Supplementary compensation paid employees. 
Note 1. Does not include wages paid for overtime. 


Further subdivisions: 
221. ELEVATORMEN AND CRANEMEN 
222. WATCHMEN, GATEMEN AND USHERS 
223. CLEANERS, OILERS AND PORTERS 
224. RAILWAY CREWS 
225. EMPLOYEES TAKING INVENTORIES 
226. LABORERS 
227. SUPPLEMENTARY COMPENSATION 


B. SHOP SUPPLIES 


240. Shop supplies 
(1) Cost of all fuel actually consumed in factory departments, such as foundries, smith 
shops and yard engines, subdivided as follows: 
(a) Coaland coke consumed 
(b) Gas consumed 
(c) Oil consumed 


(2) All payments for water supply for drinking purposes and other miscellaneous uses. 


(3) Cost of lubricating oils, greases and cutting compounds used in connection with the 
factory equipment. 


Note 1. Cost of lubricating oils, greases, etc., used in connection with service auto- 
mobiles or wagons, is chargeable to account No. 305. 


Note 2. Cost of lubricating oils, etc., used in testing turbines and other apparatus, is 
chargeable to account No. 308. 


(4) Cost of renewing and repairing all tools and equipment not enumerated under account 
No. 246, ‘‘Miscellaneous shop supplies,” or account No. 1-C-c-1, ““Semi-durable tools;”’ 
also total cost of making and repairing all wooden flasks and templets used in 
foundries or other departments. 


Note 1. This account is intended to cover the cost of those portable tools which are 
short lived and comparatively inexpensive. 

Note 2. All current expenditures for non-durable tools should be charged to this 
account, whether or not such expenditures represent initial cost of additions 
to, or replacements of, the non-durable small tool equipment. 





Standard Accounting and Cost System—Electrical Manufacturing Indusiry Section 3 
FOURTH EDITION Page 35 





Note 3. Some of the items of tools in this class are: 


Adzes 

Arbors, except foundry 

Armature saddles 

Augers, all kinds 

Awls, all kinds 

Axes, all kinds 

Bars, carrying (armature 
saddles) 

Bars, claw 

Bars, commutator draw off 

Bars, crow 

Bars, splicing 

Bars, spot facing 

Bellows, hand 

Bits, all kinds 

Bit braces 

Blades, hack saw 

Boxes, mitre 

Braces, ratchet 

Broaches 

Burrs, emery wheel dressers 

Burr, holders 

Calipers, all kinds 

Caulking tools 

Chains 

Chalk lines 

_Chasers, outside and inside 

Chisels, all kinds 

Clamps, hauling 

Clamps, malleable iron 

Clamps, splicing 

_ Clamps, steel 

Clamps, wood 

Clamps, wrought iron 

Climbers 

Collars, iron 

Collets 

Compasses 

Coppers, soldering 

Countersinks, wood 

Counterbores 

Cutters, all kinds 


Dies, threading 

Dividers 

Dogs, lathe 

Dolly bars 

Draw knives and scrapers 

Dressers, emery wheel, all kinds 

Drills, all kinds, except pneumatic, 
electric or ratchet 

Emery wheels 

Expanders, tube 

Files 

File brushes 

Flatters 

Forks, coke 

Frames, hack saw 

Fullers 

Flasks, wooden 

Grindstones, all kinds 

Groovers, all kinds 

Hammers, all kinds, except sledge, 
pneumatic and steam 

Hatchets 

Hoes 

Hollow mills 

Hooks for making fires 

Knives, all kinds 

Ladles, for melting solder and babbitt 

Lamps, blow, alcohol and gasolene 

Levels, all kinds 

Mallets, all kinds 

Mandrels, all kinds 

Nail pullers 

Picks 

Pins, drift 

Planes, all kinds 

Pliers, all kinds 

Plumb bobs 

Protractors 

Punches, belt 

Punches, hand and screw 

Punches, prick 

Rammers, hand 





Standard Accounting and Cost System——Electrical Manufacturing Industry 
FOURTH EDITION 


Reamers, all kinds 

Rules, all kinds 

Saddles, for armatures 

Saws, all kinds, except cold 
saws used in foundry 

Saw tooth blades 

Scrapers for bearings 

Screw drivers, all kinds 

Shears, paper 

Shears, snip 

Shovels, all kinds 

Slings, rope and chain 

Sockets, drill and tap 

Soldering irons 

Spoke shaves 

Spot facers, for facing off studs 
and nuts 

Spring balances 

Squares 

Steel stamps, letters and figures 





Stocks, pipe 

Straight edges 

Stones, oil 

Straps 

Swedges, all kinds 

Tape lines, 50-ft. and 75-ft. 
Taps, hand 

Taps, pipe 

Teeth, for cold saw blades 
Tools, boring mill 

Tools, lathe 

Tools, planer 

Tools, slotting 

Tongs, all kinds 

Trammels 

Wheelbarrows, canal only 
Wheels, grinding and polishing 
Wooden flasks and templets 
Wrenches, all kinds, except ratchet 


Cost, plus freight and express charges, of minor office supplies and conveniences, 
printed books, reports, forms and stationery, such as: 


Arm rests Clips (fasteners) Ice 

Baskets, desk Computing tables (book) Indices 

Baskets, waste Copy books Ink 

Binders Crayons Ink eradicator 
Blank books Cups Ink pads 

Blank cards Cuspidors Ink stands 
Blank pads Disinfectants Keys 

Blank paper Duplicator supplies Laundering 
Blotters Dusters Legal cap paper 
Boxes Electric pens Letter heads 
Bristol board Envelopes, all Mail bags 
Brooms Erasers Manifold papers 
Brushes, cleaning Eyelets Matches 
Brushes, typewriter Fasteners Memorandum books 
Cash tills Filing boxes Mucilage 
Carbon paper Folders, blank Mucilage bottles 
Cardboard Glasses, drinking Note books 
Cash boxes Hampers Oil paper 
Chamois Hektographs Pads 


Standard Accounting and Cost System—Elecirical Manufacturing Industry Section 3 





FOURTH EDITION Page 37 
Paper, blank Punches Sponges 
Paper boxes Revolvers Stamps, impression 
Paper clips Rubber bands Staple fastening machines 
Paper cutters Rubber type Staples 
Paper fasteners Rubber stamps Tablets 
Paper files Rulers Tape 
Paper weights Ruling pens Tissue paper, blank 
Parchment Scales, small Towels 
Paste Scrap books Tracing cloth 
Pencils Scrubbing brushes Tracing paper 
Pencil sharpeners Sealing wax Twine 
Pen holders Seals Typewriter ribbons 
Pens Shears Wash basins 
Pen racks Soap Whisk brooms 
Pins Soap dishes Wrapping paper 
Pouches Sponge cups Wringers 


Books, specially ruled and printed for record or statistical purposes: 


Catalogues Forms Orders 

Cards Handbooks Price lists 

Circulars Inventory books Receipts 

Classifications and forms Requisitions 

Folders Labels ; Tags 
Notices 


Note 1. Does not include advertising literature; charge it to ‘‘General expenses,”’ 
account No. 32-D-18. 


(6) Cost, plus freight and express charges, of all miscellaneous supplies consumed in 
current operations of shop departments, which are not otherwise provided for in this 
classification. 


Note 1. Some of the items are: 


Acids, except for laboratory use Boiler compound 
Alcohol Bolting cloth 

Ammonia Boots, rubber, except for 
Basins, small wash fire department 
Baskets Bone, case hardening 
Barrels Borax 

Belt, cement and dressing Boxes, tote 

Beeswax Bricks, rubbing crocus 
Benzine Brooms 

Blow hole cement Brushes, dusting, file, 
Blueprints paint, rubbing, wire, etc. 


Boards, molding 





Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry 


Page 38 


FOURTH EDITION 





Buckets 

Burnishers, if not metal 

Candle wicks 

Cans, oil, sprinkling 

Carborundum, grain 

Case hardening boxes 

Case hardening bone 

Cement, belt 

Cement, blow hole, etc. 

Chalk 

Chamois 

Charcoal 

Chaplets 

Cheet handles 

Chloride of lime 

Chemicals and drugs for shop use, 
except those for laboratory and 
testing purposes or first aid to 
the injured 

Clay, fire 

Cleaning compound 

Cloth, cotton, emery 

Compound, welding and boiler 

Cord 

Core compound 

Core making sand 

Core oil 

Core rods 

Core wash 

Cotton cloth 

Cotton wicking 

Crayon 

Crocks 

Crocus brick 

Crucibles 

Cups, tin 

Dippers 

Disinfectants 

Drugs and chemicals for shop use, 
except those for laboratory 
and testing purposes or 
first aid to the injured 

Dusters 


Dust pans 
Drilling soap 
Emery 

Emery boxes 
Emery cloth 
Emery flour 
Emery paper 
Facing, foundry 
Faucets, other than water system 
Fire clay 

File brushes 
Flour, emery 
Flour, foundry 
Flux, soldering 
Foundry sieves, hand 
Foundry brushes 
Garnet paper 
Gaskets 
Gasolene 

Gate hooks 
Globes, lantern 
Gloves, rubber 
Glue 

Gluepots 
Graphite 

Hand lamps 
Hinges and hasps 
Hooks and eyes 
Ice 

Ladders, wooden 
Lamps, hand 
Lantern globes 
Lanterns 

Lead, red 

Lead, white 
Liquid measures 
Locks, drawer 
Markers 
Marking pots and brushes 
Matches 

Metal polish 
Molasses 

Mops 





Standard Accounting and Cost System—Electrical Manufacturing Industry 
FOURTH EDITION 


Molding boards 

Molding sand 

Naphtha 

Oil, except lubricating and fuel 

Oil cans 

Oil soap 

Oxygen 

Oil gates 

Pails 

Paint brushes 

Paper bags and boxes 

Paraffin wax 

Paste, mineral 

Plaster pans 

Plumbago 

Polish, metal 

Polishing putty 

Pomade 

Potash 

Pulls, drawer 

Pumice stone 

Putty 

Red lead 

Resin 

Retort cement 

Riddles 

Rope, hemp 

Rubbing bricks 

Rubbing brushes 

Rubber gloves 

Rubber boots, except for 
fire department 

Sal-ammoniac 

Sal-soda 

Sand, molding and core making 

Sand paper 


Further subdivisions: 


241. FUEL CONSUMED 
242. WATER 
243. LuBRICANTS 


244. NoON-DURABLE SMALL TOOLS 


Section 3 
Page 39 





Sand, used in sandblast 
Sash cord 
Savagram 

Saw dust 

Sieves, foundry 
Soap 

Solarine 

Spigots 

Sprayers 
Sprinkling cans 
Steam and water packing 
Stencil paint 
Stone, pumice and soap 
Tacks 

Tallow 

Tin cups 

Tool boxes 

Tote boxes 
Toilet paper 
Twine 

Vaseline 

Vitriol 

Wash basins 
Washolene 
Waste 

Waste cans 
Wax, paraffin 
Whetstones 
White lead 
Whisk brooms 
Whiting 
Wicking 
Window cleaners 
Wire brushes 
Wood, kindling 


245. OFFICE SUPPLIES, STATIONERY AND PRINTED FORMS 
246. MISCELLANEOUS SHOP SUPPLIES 


Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 40 FOURTH EDITION 





C. UNASSIGNABLE FREIGHT, EXPRESS AND CARTAGE 


250. Unassignable freight, express and cartage 


Unassignable freight and express charges, including switching charges, on materials 
and supplies; both incoming and outgoing transportation charges on materials sent 
by vendors for trial; all payments for miscellaneous and unassignable cartage of 
materials and supplies, both incoming and outgoing; also cost of transferring waste 
material about the plant, truckage to and from departments, etc. 


D. SUNDRY MANUFACTURING EXPENSES 


Sub-accounts: 
260. Employees’ welfare 


(1) Wages paid to employees, while absent on account of illness. 


(2) All expenses of operation and maintenance of the Company’s hospitals, also all medi- 
cines and supplies for first aid to the injured throughout the factory. 


(3) Payments to the estates of deceased employees or the beneficiaries, either direct or 
through the medium of mutual benefit associations. 


(4) Subscriptions to hospitals and other local organizations, also allowances to disabled 
or veteran employees or their families. 


Note 1. Does not include allowances for lost time, funeral expenses, etc., of injured 
employees, in cases when there is a possible liability on the part of the Com- 
pany. (See account No. 270.) 


(5) Net result of operating the Company’s restaurants. 
(6) Vacation allowances to wage earners in factory shops and yards. 


Note 1. Vacation allowances to salaried employees should be charged to the account 
to which such employees’ salaries are regularly charged. 


(7) Other expenses of every kind in connection with employees’ welfare, such as conducting 
clubs, club rooms, reading rooms, rest rooms, etc., for the use of employees, less any 
revenue secured from such enterprises. 


Further subdivisions: 


261. SICK RELIEF 

262. HOSPITAL SERVICE 

263. EMPLOYEES’ DEATH BENEFIT 
264. GRATUITIES 

265. RESTAURANTS 

266. SHOP VACATION ALLOWANCES 
267. . OTHER WELFARE EXPENSES 





Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 


FOURTH EDITION 


Page 41 





270. Accident compensation 


All payments as indemnity, allowances for wages, doctors’ bills, carriage hire, public 
hospital service, legal expenses, etc., in connection with injuries to employees and 
others, for which the Company is held responsible, when such payments, etc., are not 
covered by liability insurance; also premiums on employers’ liability insurance policies. 


280. Shop losses 


290. 


(1) Losses due to errors of factory workmen, such as breakage, misplacement or careless 


(2) 


(3) 


shop work of any kind. Labor expended on defective castings produced in the Com- 
pany’s foundries, is chargeable to this account. 

Cost of remedying defects in material purchased from outside manufacturers, when 
such cost cannot be collected; also the direct labor expended, before defects are de- 
tected, on defective castings purchased outside. 


All other shop losses due to errors of clerical employees, replacement of lost material, 
ordering in excess of requirements, etc. . 


Further subdivisions: 


281. DEFECTIVE WORKMANSHIP 
282. DEFECTIVE PURCHASED MATERIAL 
283. OTHER LOSSES DUE TO ERRORS 


Purchasing, receiving, storekeeping and shipping 


(1) 


(2) 


(3) 
(4) 


Salaries and wages, cost of supplies, power, heat, light and repairs to equipment and 
all other expenses of the Purchasing department, including the factory’s proportion 
of the expense of the General purchasing department. 

Salaries and wages, cost of supplies, power, heat, light and repairs to equipment and 
all other expenses of the Receiving department. 

Salaries and wages, cost of supplies, power, heat, light and repairs to equipment and 
all other expenses of the Storekeeping department, including general storerooms. 
Salaries, wages and cost of supplies, including excelsior, twine, laths, burlap, wrap- 
ping paper, etc., but not boxes or containers, which are charged to productive material, 


consumed in packing material; also cost of power, heat and light and all other expenses 
of the Shipping department. 


Note 1. Does not include labor, material or expense in making boxes or otherwise 


preparing special apparatus for shipment which expense is chargeable to 
“‘Boxing.’”’ (See Section 2, page 5.) 


Further subdivisions: 
291. PURCHASING DEPARTMENT 
292. RECEIVING DEPARTMENT 
293. STOREKEEPING DEPARTMENT 
294. SHIPPING DEPARTMENT 





Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 42 FOURTH EDITION 





300. Miscellaneous manufacturing expenses 


(1) All expense in connection with the transfer of a department from one building to 
another, or from one part of a building to another part of the same building, or from 
one city to another, including personal traveling and moving expenses of employees 
transferred; expense of re-arranging equipment within the departments or buildings 
affected by such transfer. 


(2) Expense of telegraph service, including salaries of operators, and all local and long 
distance public telephone service incurred at the factory as a whole; rentals of interior 
or “‘private wire’ service and cost of supplies in connection therewith; also the wages 
of switchboard operators. 


Note 1. The cost of repairing any interior telephone system owned by the Company 
should be charged to account No. 456. 


(3) Payments for transportation, hotel and other necessary expenses of travel of employees 
connected with factories; expenses in connection with conducting or attending formally 
called conferences and meetings of Company employees, such as traveling expenses, 
rentals of rooms for meetings and entertaining employees; also traveling and enter- 
taining expenses of the Company’s employees, attending conventions and meetings of 
outside commercial or technical organizations. 


Note l. Traveling expenses in connection with law suits affecting, exclusively, 
factory operations are chargeable to account No. 309. 


(4) Wages of chiefs of the Company’s fire departments and their assistants, payments 
to members for attending fire drills and answering fire alarm calls, and any other ex- 
penses, such as cost of caps, boots, uniforms, parades, etc. 


(5) Wages of garage men, chauffeurs, stablemen, hostlers and drivers; rentals (if garages, 
stables, etc., are leased or horses are boarded), insurance, etc.; cost of supplies, such as 
renewals of batteries, gasolene, oil, robes, tires, small tools, shoeing, fodder, medicines, 
blankets, harness, etc.; also liability insurance account of automobiles. 


(6) Cost of labor and miscellaneous supplies used in connection with lighting systems and 
shop motors, such as carbon brushes, lamp globes, carbons, bulbs and other electrical 
gas and oil fittings, and all other running expenses of illumination. 


Note 1. Does not include cost of repairing arc lamps and lighting fixtures, etc. (See 
maintenance accounts.) 


(7) Payments for services of men engaged in the instruction of apprentices during school 
time, also payments to apprentices for school time and as bonuses. 


Note 1. Does not include wages of foremen, assistant foremen or of those men whose 
work in the shops is primarily productive and whose instruction to others 
is merely incidental thereto. 


Note 2. By “school time” is meant class room time, not time while engaged in shops 
on productive work. 





Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 
FOURTH EDITION Page 43 





(8) Wages, material and other expenses incurred in connection with the testing of com- 
mercial product, unless such expenses are clearly traceable to a specific order. 


(9) All indirect manufacturing expenses which are not otherwise provided for in this classi- 
fication, such as uncollectable damage or loss in transportation, wages of men while on 
military duty, cost of reclaiming stolen property, minor charges for packing and boxing 
account of purchased materials, premiums on employees’ bonds, entertainment, carriage 
hire, street car fares, membership fees in trade and manufacturers’ associations, wages 
paid and material and supplies used in the operation of pneumatic tube systems (except 
cost of maintenance which is chargeable to account No. 456); cost of atlases, dictionaries, 
directories and standard reference works on technical, financial, and accounting subjects; 
subscriptions to newspapers, magazines, technical journals, railroad guides, etc.; payments 
to local attorneys as retainers, for services, settlements, etc., also court fees, traveling 
expenses and wages of witnesses, etc., when they relate solely to manufacturing depart- 
ments; also postage, net results of operating farms, and demurrage for detention of cars 
belonging to railroad companies (less refunds); also royalties relating to manufacturing 
processes when not chargeable to Development and complaints, or to direct cost. 


Further subdivisions: 


301. RE-ARRANGEMENT OF EQUIPMENT 

302. TELEGRAPH AND TELEPHONE EXPENSES 
303. TRAVELING EXPENSE 

304. FIRE DEPARTMENT 

305. GARAGE AND STABLES 

306. SHOP ELECTRIC PLANT 

307. INSTRUCTION OF APPRENTICES 

308. UNASSIGNABLE TESTING EXPENSES 
309. OTHER MANUFACTURING EXPENSES 


F. FIXED CHARGES 
320. Fixed charges 
(1) Premiums for fire and elevator insurance. 


Note 1. Does not include premiums for employers’ liability insurance; they should be 
charged to account No. 270. 


Note 2. Does not include premiums for employees’ bonds; they should be charged to 
account No. 309. 


Note 3. Does not include premiums account of property not used for manufacturing 
purposes; they should be charged to account No. 33, “‘Other income.” 


Note 4. Does not include premiums for fire or liability insurance on automobiles or 
other conveyances; they should be charged to account No. 305. 


Pes 


Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 44 FOURTH EDITION 





(2) All taxes and assessments, except water taxes, on real estate and personal property 
carried in ‘‘Manufacturing plant accounts.” 


Note 1. Does not include taxes on property not used for manufacturing purposes; 
they should be charged to account No. 33, “Other income.” 


Note 2. Does not include federal, state or municipal taxes on income, capital invested 
or personal property other than manufacturing plants; they should be 
charged to account No. 32-D-19, 32-A-19 or to Non-departmental expense. 


(3) Rentals for property used for manufacturing purposes. Rentals received from prop- 
erty which is a part of a factory plant, should be credited to this account. 
Note 1. Does not include rentals paid or received account of property not used for 


manufacturing purposes. 


(4) Normal depreciation of buildings and equipment, machinery and electrical apparatus, 
durable tools and instruments, patterns, furniture and fixtures and other manufactur- 
ing plant equipment. (See Section 2, page 11.) 
(5) Factory’s proportion of the expenses of general manufacturing departments. 
Note 1. Does not include the factory’s proportion of the expense of the General pur- 
chasing department. (See account No. 291.) 
Further subdivisions: 


321. INSURANCE 

S220 LASHES 

323. RENTALS 

324. DEPRECIATION 

325. GENERAL OFFICE ASSESSED CHARGE 


Power, heat and light accounts 
F. POWER, HEAT AND LIGHT—GENERATING AND DISTRIBUTING 
Sub-accounts: 
340. Operating labor 
(1) Salaries of superintendents and foremen and their assistants. 


(2) Salaries and wages of employees engaged in general clerical service, including ste- 
nographers and office boys. 





Standard Accounting and Cost System—Electrical Manufacturing Industry 


Section 3 
FOURTH EDITION 


Page 45 





(3) Wages paid air compressor, accumulator, conveyor and switchboard operators, dynamo 
tenders, engineers, firemen, cleaners, oilers, ashmen and shovelers, also for cleaning 
boilers, redistributing fuel from stock piles to points of consumption, handling coal 
at crushers, and all other miscellaneous and unskilled labor incidental to the operation 
of the power plant, which are not otherwise provided for in this classification. 


Note 1. Includes wages of yard laborers and drivers and employees on the Company’s 
wagons and trucks, when engaged in redistributing fuel from stock piles to 
points of consumption, also the expense of hiring outside teams and of leasing 
railroad cars for this purpose. 


Note 2. Does not include wages paid for repairing arc lamps and lighting fixtures, 


etc.; they should be charged to account No. 374. 


Further subdivisions: 


341. SUPERVISION 
342. CLERICAL 
343. OTHER LABOR 


350. Supplies 


(1) Cost of all fuel actually consumed, subdivided as follows: 
(a) Coal consumed 
(b) Gas consumed 
(c) Oil consumed 


(2) Cost of water for power purposes. 

(3) Cost of alllubricating oilsand greases used in power plant. 

(4) Cost of all supplies, such as waste, etc., used in the power plant, which are not other- 
. wise provided for in this classification. 


Further subdivisions: 


351. FuEL 

352. WaTER 

353. LUBRICANTS 

354. OTHER SUPPLIES 


360. Incidental operating expenses 


(1) Cost of renewing and repairing non-durable small tools used in the power plant. 
(See account No. 244 for partial list of such tools.) 


Note 1. All current expenditures for non-durable tools should be charged to this 
account, whether or not such expenditures represent initial cost of additions 
to, or replacements of, the non-durable small tool equipment. 





Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 46 FOURTH EDITION 





(2) Cost, plus freight and express charges, of minor office supplies and conveniences, 
printed books, reports, forms and stationery used in the power plant. (See account 
No. 245 for partial list of stationery, etc.) 


(3) Labor, material and supplies incidental to the operation of destructor plants, when 
such plants are used for the generation of power, heat or light; also all minor and 
incidental expenses of the power plant, which are not otherwise provided for in this 
classification. 


Further subdivisions: 


361. SMALL TOOLS 
362. STATIONERY 
363. OTHER INCIDENTAL EXPENSES 


370. Maintenance 


(1) Cost of repairing and partially renewing power plant buildings and structures. 


Note 1. Includes maintenance of heating and ventilating systems and fire protective 
equipment in the power stations. 


(2) Cost of repairing and partially renewing: 
Stationary boilers and attachments, such as feed water heaters and injectors; 
also blowers and blast pipes used exclusively in connection with boilers; 
Automatic stokers and their accessories; 
Auxiliary apparatus in boiler room; 
Ash and coal conveyors and their equipment; 
All pipes and fittings in the boiler room. 


Note 1. Does not include repairs to boilers used exclusively with heating and ventilat- 
ingsystems. (Seeaccount No. 371.) 


(3) Cost of repairing and partially renewing: 
Stationary engines, air compressors, turbines, condensers and cranes; 


Auxiliary apparatus and pumps in engine room; 
All pipes and fittings in engine room. 


(4) Cost of repairing and partially renewing dynamos, transformers, converters, turbo- 
generators, switchboards and all other electrical apparatus, including wiring, also 
arc lamps, etc., contained in the power plant. 


(5) Cost of repairing and partially renewing power plant equipment not provided for 
elsewhere in this classification, such as: 
Pumps and connections located at pumping stations; 
Buildings, boilers and other equipment constituting destructor plants, when 
such plants are used to generate power, heat or light; 


Transformers and other apparatus used in connection with receiving high 
voltage current purchased outside. 





Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 
FOURTH EDITION Page 47 





Further subdivisions: 
371. BUILDINGS 
372. STEAM PLANT 
373. ENGINES AND TURBINES 
374. ELECTRICAL PLANT 


375. OTHER MAINTENANCE 


380. Fixed charges 
(1) Premiums for fire, boiler and elevator insurance incidental to the operation of the 


power plant. 


(2) Taxes and assessments on real estate, personal property, etc., incidental to the opera- 
tion of the power plant, except water taxes which should be charged to account No. 
352. 


(3) Rentals of property used for power purposes. 


(4) Normal depreciation of buildings and equipment, machinery and electrical apparatus, 
instruments, furniture and fixtures and other equipment in the power plants. (See 
Section 2, page 11.) 


(5) Power plant’s proportion of the expenses of the general manufacturing departments. 


Further subdivisions: 
38]. INSURANCE 
382. TAxXEs 
383. RENTALS 
384. DEPRECIATION 


385. GENERAL OFFICE ASSESSED CHARGE 


G. POWER, HEAT AND LIGHT—PURCHASED 


390. Power, heat and light—purchased * 


Cost of all power, heat and light purchased from outside companies. 





Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 48 FOURTH EDITION 





Maintenance accounts 


The following accounts are not to include cost of repairing or partially renewing the build- 
ings and equipment of those departments, such as Power, Purchasing, Receiving, Storekeeping, 
Shipping, etc., the entire expense of which is to be accumulated in single accounts. 


H. MAINTENANCE OF LAND AND BUILDINGS 


Sub-accounts: 
410. Land 


(1) Cost of repairing and partially renewing all dykes, roadways, sidewalks and paths 
throughout the plant; and of regrading and repaving yards. 

(2) Cost of laying out and maintaining gardens, lawns and recreation grounds, and of 
green houses and other'structures, benches, fixtures, tools and implements used 
exclusively in connection therewith. 


Further subdivisions: 
411. RoaApWAYS AND GROUNDS 
412. GARDENS AND LAWNS 
420. Buildings 
(1) Cost of repairing and partially renewing factory office buildings. 
(2) Cost of repairing and partially renewing other factory buildings such as shop build- 
ings, foundries, etc. 
Further subdivisions: 
421. OFFICE BUILDINGS 
422. OTHER BUILDINGS 


430. Structures 

(1) Cost of repairing and partially renewing all permanent structures and their founda- 
tions as defined under account No. 1-B-b-1. 

(2) Cost of repairing and partially renewing all water, drainage and sewer pipes and their 
fittings which form a part of the matin trunk lines located outside and inside of buildings. 

(3) Cost of repairing and partially renewing all steam, gas, air, fuel oil and hydraulic pipes 
and fittings which form a part of the main trunk lines located outside and inside of 
buildings. 

(4) Cost of repairing and partially renewing all electrical conductors for power and lighting 
current, which form a part of the main trunk lines from the main distributing switch- 
board, through yards, and znside of buildings, including subways for underground 
pipes and conductors and poles and fittings for overhead conductors. 

Note 1. Does not include cost of repairing wiring for telephone, fire alarm and watch- 
men’s systems, which should be charged to accounts Nos. 456 and 458. 

Note 2. Does not include cost of repairing railway overhead construction, which 
should be charged to account No. 491. 


Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 
FOURTH EDITION Page 49 





440. 


450. 


Further subdivisions: 


431. STRUCTURES 

432. WATER, DRAINAGE AND SEWER PIPES (MAIN TRUNK LINES) 
433. PIPING (MAIN TRUNK LINES) 

434. ELECTRICAL CONDUCTORS (MAIN TRUNK LINES) 


Heating and ventilating and other piping and wiring 


(1) Cost of repairing and partially renewing heating and ventilating systems as defined 


(2) 


under account No. 1-B-d-1; also cost of repairing and partially renewing steam vacuum 
pumps, blowers and fans and motors which drive them, used in connection with heat- 
ing and ventilating systems. 


Cost of repairing and partially renewing all piping, plumbing and electric wiring inside 
of buildings, as defined under account No. 1-B-d-2, except that which forms part of 
main trunk lines; also cost of repairing and partially renewing sprinkler systems. 


~ Further subdivisions: 


441. HEATING AND VENTILATING 
442. OTHER PIPING AND, WIRING 


Machinery, electrical apparatus, furniture and fixtures 


(1) 


(2) 


(3) 


(4) 


Cost of repairing and partially renewing all machinery as defined under account No. 
1-C-a-1, and motors for it, except the cost of repairing conveying machinery, which is 
chargeable to account No. 453. 


Cost of.repairing and partially renewing all semi-durable tools as defined under account 
No. 1-C-c-1, and motors for them. 


Cost of repairing and partially renewing all cranes, elevators, transfer-tables, con- 
veyors, etc., and motors for them. 


Cost of repairing and partially renewing all electrical apparatus and equipment as 
defined under accounts Nos. 1-C-a-2 and 1-C-c-2. 


Note 1. Doesnotinclude cost of repairing motors used in connection with the heating 
and ventilating systems. (See account No. 441.) 


Note 2. Does not include cost of repairing motors used in connection with machine 
tools. (See account No. 451.) 


Note 3. Does not include cost of repairing motors used in connection with elevators, 
cranesand conveyors. (Seeaccount No. 453.) 


Note 4. Does not include cost of repairing motors used in connection with boilers, 
ovens and furnaces. ._ (See account No. 455.) 


Section 3 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 50 FOURTH EDITION 





(5) Cost of repairing and partially renewing all boilers, heating and melting furnaces and 
ovens as defined under account No. 1-C-a-3, also their equipment consisting of blowers 
and exhausters for forced draft and circulation of air and motors which drive this 
equipment. 

Notel. Does not include cost of repairing electrical controlling equipment for motors. 
(See account No. 454.) 


Note 2. Material cost of re-lining ladles should be charged to account No. 246; the 
labor cost is direct labor of the foundry melting department. 


(6) Cost of repairing and partially renewing all permanent shop fixtures and equipment 
as defined under account No. 1-E-a, except shafting, hangers, etc.; also cost of repairing 
inside crane runways. 


(7) Cost of repairing and partially renewing all factory office furniture and appliances as 
defined under account No. 1-E-b. 


(8) Cost of repairing and partially renewing all fire protective apparatus as defined under 
account No. 1-E-c. 


(9) Cost of repairing all molds, jigs, punches, dies and special tools. 
(10) Cost of repairing and replacing all metal and snap flasks and metal arbors and cores. 


(11) Cost of repairing and partially renewing foundations as defined under account No. 
1-C-b-1; the cost of new foundations, when the location of machine tools or equip- 
ment is changed; also the cost of removing old machines preparatory to the installa- 
tion of new ones. 


(12) Cost of repairing and partially renewing all shafting (main line and countershafting), 
hangers, pulleys, line shaft couplings, clutches (when not attached to machines), 
collars, drip cups, drip pans, oil cups, etc., also belting and belt lacing. 


Note 1. Does not include cost of repairing countershafting which is usually bought as 
a part of machines. (See account No. 451.) 


Further subdivisions: 


451. MACHINE TOOLS 

452. SEMI-DURABLE TOOLS 

453. ELEVATORS, CRANES AND CONVEYORS 

454. ELECTRICAL APPARATUS AND EQUIPMENT 

455. BOILERS, OVENS AND FURNACES 

456. SHOP FIXTURES AND EQUIPMENT 

457. FURNITURE AND APPLIANCES IN FACTORY OFFICES 
458. FIRE PROTECTIVE APPARATUS 

459. MOLDS, JIGS, PUNCHES, DIES AND SPECIAL TOOLS 
460. METAL FLASKS 

461. FouNDATIONS 

462. SHAFTING, BELTING AND PULLEYS 





Standard Accounting and Cost System—Electrical Manufacturing Industry Section 3 
FOURTH EDITION Page 51 





470. Maintenance of patterns 


Cost of repairing and altering standard patterns. Renewals to be charged to 
Development and complaints. 


480. Automobiles and other conveyances 


Cost of repairing and partially renewing all conveyances and equipment, such as auto- 
mobiles of all kinds, carts, trucks, wagons and stone boats. 


Note 1. Does not include cost of repairing hook and ladder trucks and hose wagons. 
(See account No. 458.) 


490. Other equipment 


(1) Cost of repairing and partially renewing all railway tracks and overhead construction 
as defined under account No. 1-F-a-1. 


(2) Cost of repairing and partially renewing all rolling stock as defined under account 
No. 1-F-a-2. 


Further subdivisions: 


491. RAILWAY TRACKS AND OVERHEAD CONSTRUCTION 
492. ROLLING STOCK 












) : ; A orbit. ide WORE odie ~ ane 
: Nie) Ja Sesnayetnde 


Pa. ) oye >eoteiaseaqliups bis plea in gebainese edi sary: pam 
i os pokinntae, Bat Para eid: sehebnrnn 


ie ihubueareosenk fr yalvertd sa ‘ he au ie van sitet z mrs al hestig ce 
| ; wing a Tei i fs ¥ ’ a is 4 
Wie fn | of mee i) a ay Y 


a | f OW Ge | OSE LEREe Sena ne iin A 


A ae Ape Y sai ie th me) 4) mis 
ppd anny fare wy baoltiev Inte sane “eae st Hs Th pny! ihe! bang plane in 7 i cuts. 
| pee a vipog.y OM trades wins Hanae we 


; cote fracisty on sande anne die Wctgys sue at poh Die yetett inert to Jand © 
7 a BHO ie mah en AM i Watts x “— VP y 4 ; 
ay ; OTe Eh OTR | oe 


ne Og tats tide if nan betel } 
«tte byes eee aooeigaet 
wr er edo dng ts FO eX a ir YK! Wy AD rT ee | Nis sy torah 


ie 1p Ge ad i . 
: , ‘ igre & ¥ if us | "i ae tt ‘ nayct aes ene 


4h es : Bai y" 















‘ tis ayer Loeb thee, Sete evr 
, we iy j aL tee 3 
; ; i 
10s sift ate chew to Ape 
1 
| . % vi 
7 ty 
4 ‘ : . ee oe 
Bb ’ { y 
Mey 
£, b 
+ 
ys ‘ 
#) ie ‘ 
é r rt 
as ‘ TY) i da yt a oa! 
‘ A wld ‘ d ue 5 1 
} ms s = ’ ‘ \ 
om \ on! ho.) a F Ae er Je Gs 1 : iW at 
i v 
ve xe, 1a : cs an 
Abe vy Q ean . 4 





ow ad iy aoe 
“ a ths apie ft a 
a eae 1 MO Per: 
rome, § of AK tat ieee isha Noles | 


siti wae vse shetty 









(FOURTH EDITION) 


STANDARD ACCOUNTING AND COST SYSTEM 
FOR THE 


ELECTRICAL MANUFACTURING INDUSTRY 


Section 4 


SUGGESTED METHOD FOR APPLYING 
THIS SYSTEM 


Se es ii) Corea 
€ , * v J A hs ¥, 
ay ea ) > ‘he { : WA 4 1.4 Ay t, af 


The 
| CaTedooue 
‘ a f 





Standard Accounting and Cost System—Electrical Manufacturing Industry Section 4 
FOURTH EDITION Page 1 





SUGGESTED METHOD FOR APPLYING 
STANDARD ACCOUNTING AND COST SYSTEM 


The outlines of the suggested system are presented in the following order: 


1. Theelements of costs. 

Method of designating accounts and departments. 

3. Theshop order system. 

4. Bookkeeping and other records which materially aid in the compilation of accu- 
rate costs. 

5. Method of recording details in sub-ledgers and upon individual ‘‘job cost sheets.”’ 

6. Absorption of indirect manufacturing expenses. 

7. Sources of entry for manufacturing cost. 

8. Absorption of general expenses. 

9. Proper accounting for disposition of plant scrapped or sold. 


ro 


1. THE ELEMENTS OF COST 
Definitions of the elements of cost will be found on pages 4 and 5 of Section 2. 


2. METHOD OF DESIGNATING ACCOUNTS AND DEPARTMENTS 


For convenience in recording operations and collecting results, it is desirable to establish a system 
of numbers, one series for designation of accounts; and, for those concerns which, by reason of the 
variety of their product, have a departmental organization, another series for designation of 
departments.' Departments may be designated instead by symbols. 

However, asstiming that preference is given to numbering and that a manufacturer, having four 

departments, designates them as Nos. 1, 2, 3 and 4, also that he assigns a block of numbers, 

beginning with 500, for “‘Manufacturing plant’’ accounts (see Section 3, page 2, on which these 
accounts are designated by letters) and a block, beginning with 600, for development orders; 

further that for ‘Indirect manufacturing expense’’ accounts, the numbers as given in Section 3, 

pages 28 to 51 will be used; the following examples will serve to illustrate the procedure for 

identifying operating charges for individual orders and departments: 

a. A lathe is purchased at a cost of $1000 for Department No. 2, and, the account in the ‘“‘Manu- 
facturing plant” sub-ledger for ‘‘Machinery and tools’’ having been assigned No. 503, 
the distribution of this charge will be to account No. 2-503. 

b. Department No. 4 undertakes development of a certain new device involving time of engineers 
and work in the shops. It has obtained development order No. 634, therefore, all time, 
material and expense in connection with this work, will be charged to account or order 
No. 4-634 in the “Engineering or development”’ sub-ledger. 

c. Wages of inspectors engaged in Department No. 1 will be charged account No. 1-203 in the 
“Indirect expense’”’ sub-ledger. 

Manufacturers, having a great many departments, will find it convenient to have a key to the 

designations assigned to departments. This may be combined with a key to the account numbers, 

by preparing blue prints showing the department numbers vertically and the account numbers 
horizontally, or vice versa. Copies of these blue prints should be in the hands of every employee 
who is in any way interested in the distribution of disbursements. 





} 
1 


5 


Section 4 Standard Accounting and Cost System—Electrical Manufacturing Industry 


Page 2 


FOURTH! EDITION 


3. THE SHOP ORDER SYSTEM 


A. PRODUCTION ORDERS 


Production orders are those issued to the factory authorizing the manufacture of material or 
apparatus to be shipped to customers. 
The following is quoted from the bulletin issued by the Federal Trade Commission under date of 


July 1st, 


1916: 


“‘There are, generally speaking, but two distinct methods of manufacture. Each requires 
a cost system a little different in detail but identical in fundamental principles. The 
first of these is used in a business where every order is a separate article of manufacture, 
very often made to order, and the selling price fixed before work is started; and the 
second is used in a business where the output consists of one or more articles which are 
being continually produced. For convenience we will designate the cost systems appli- 
cable to each as the ‘Job cost system’ and the ‘Continuous production system.’ ”’ 


1. The job cost system 


“The first step is to provide for giving the factory instructions as to what work is to be 
done, and a form should be provided which must give the following information; job 
number, date, name and address of customer for whom work is to be done, a description 
of the work to be done, giving sufficient details, specifications as to what material will be 
needed, and shipping instructions. This form should also have space for the entry of 
shipments, so that when the work is done, the order form will be a complete record. <A 
duplicate of this factory order should be kept in the office and when the original is sent 
to the factory the cost clerk opens a job cost sheet under that number.” 


2. The continuous production system 


‘‘A system for recording the costs of a continuous product is a much simpler one than a 
system for recording the cost of job work, because in the former costs are figured depart- 
mentally or by processes instead of by jobs. The accounts are practically the same, 
except that there is not the necessity for the same detailed analysis as in the job cost 
system. 


Note: Ina continuous process production, individual shop orders should be limited to 
a reasonable quantity or period. 


The business must be departmentalized as the first step, and the departmental divisions 
carefully observed, as otherwise true costs will not be obtained.” 


Standard Accounting and Cost System—Electrical Manufacturing Industry Section 4 
FOURTH EDITION i Page 3 





B. MANUFACTURING PLANT ACCOUNT ORDERS 


Instructions or orders to the factory to do work or produce equipment chargeable to ‘‘ Manu- 
facturing plant”’ accounts, will be treated exactly the same as ‘“‘job cost’’ orders, but will be 
issued in a separate series of numbers. 


C. EXPENSE ACCOUNT ORDERS 


Work to be performed in the shops, which is chargeable to expense, can best be recorded by the 
issue of so-called standing expense orders, bearing numbers to correspond with those assigned 
to the accounts to which they are chargeable, prefixed or suffixed by the departmental designation. 
Special expense order numbers can be given to specific jobs when it is desirable to know the cost. 


D. DEVELOPMENT AND COMPLAINT ORDERS 


The work of engineering, drafting and shop departments, which is chargeable to ‘‘ Development 
and complaints’’ should be controlled by special orders in a separate series of numbers. 


E. UNIT COST DEPARTMENTS 


The manufacturing functions for the following materials are suggested for segregation into ‘unit 
cost’”’ departments: 


Grey iron, malleable iron, steel and brass castings, wire and cable, porcelain, insulation, 
screw machine output, sheet steel punchings, varnishes and compounds, etc. 


The cost of the output of such ‘‘unit cost’’ departments should be carried to the cost summary 
sheet as material. 


Contributary work by one assembly department for another may, when practicable, be segre- 
gated on the cost summary sheet into material, labor and indirect manufacturing expense. 


Note: A suggested Foundry Cost System is included as Section 6 of this manual. 


1 
\ 

\ 

\ 


Section 4 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 4 FOURTH EDITION 





4. BOOKKEEPING AND OTHER RECORDS WHICH MATERIALLY 
AID IN THE COMPILATION OF ACCURATE COSTS 


(A) THE GENERAL LEDGER 


(B) THE SUB-LEDGERS 


When the volume of business is small, a concern may find it practicable to confine its records to 
the general ledger only. In most instances, however, the business is of sufficient magnitude to 
warrant the maintenance of ‘‘sub-ledgers”’ containing accounts subsidiary to those carried in the 
“ceneral ledger’; accounts in the sub-ledger are termed ‘“‘sub-accounts,”’ while those in the 
general ledger are termed “‘controlling accounts.’’ The sub-accounts must always be in balance 
with the corresponding controlling accounts. 


It is assumed that all companies carry some or all of the sub-accounts listed in Section 3, page 14. 
These may be further subdivided as deemed desirable. 


In connection with these sub-accounts further records are necessary to aid in the determination 
of accurate costs and some of these records are suggested below under the titles of the several 
sub-accounts: 


(C) SUPPLEMENTAL RECORDS 


Each manufacturer can best decide for himself what forms he may require for initiating work, 
receiving incoming material, withdrawing material and supplies from the point of storage to the 
point of consumption, recording labor activities, accompanying transfers from one production 
center to another, authorizing changes, reporting defects and losses, announcing completions 
and shipments, and crediting returns, but the following records are essential : 


1. Stores record 


A card or loose leaf record should be establi$hed for each class and size of raw material 
purchased and charged to “Stores account.” The record should provide, in convenient 
form, for recording the purchase order, the quantity ordered and received; also the 
quantities withdrawn, and balance in stock. 


The record covering factory finished stocks will be a record in the same form as for raw 
materials, quoting the number of manufacturing order, the quantity ordered and re- 
ceived; also the quantities withdrawn, and balance in stock. 


Note: Whether or not these records should give the unit cost (including transportation 
on purchased materials) is a matter of organization. But when these records 
are to serve the purpose of determining the cost of finished product, then such 
information is essential and the form of record should be such as to permit of 
the entry of the unit cost for each lot, and of averaging these costs over given 
periods unless the practice is adopted of using the cost of each lot until issued. 





Standard Accounting and Cost System—Electrical Manufacturing Industry Section 4 
FOURTH EDITION Page 5 





2. Payroll record 


The purpose of this record is two-fold: 1, to determine the amount of wages payable 
to individual employees; 2, to determine the aggregate charge for labor against individual 
departments, specific classes of apparatus or individual production orders. 


Manufacturers employing a large number of operators will find it necessary to main- 
tain two separate records for these purposes. As an aid to the determination of costs, 
it is primarily essential that there be a very careful distribution of the aggregate payroll 
for each period against individual production orders, expense orders, plant account 
orders, development and complaint orders, etc. 


3. Indirect manufacturing expense record 


It is most important, not only for the determination of proper overhead percentages in 
application to costs, but also for proper control of the manufacturing expenses, to main- 
tain comprehensive sub-records of all those expenditures which are defined under the 
above title in Section 3. 


The record should be one which will, in convenient form, produce the segregation of the 
aggregate amount of indirect manufacturing expense under two principal divisions: 


1. According to the account numbers as given in Section 3. 


2. By departments. 


As an assistance in the control of expenses, itis desirable to show on the departmental 
records, the expenses charged directly to the department, separate from general factory 
expenses assessed to the department. 


The designation of accounts and departments by numbers and symbols respectively, as 
suggested on page 1 of this section, will materially simplify the arrangement of such a 
record. The listing of account numbers vertically, with columns horizontally across the 
record, each column representing a department, will give a very satisfactory summary 
in detail of the expense incurred for the department whose number or symbol is shown 
at the head of the column, simultaneously giving this total expense by account numbers. 
It will also give the aggregate expense incurred for each expense account number for 
the entire establishment, as shown in the last column, at the same time making available 
for review, the amount expended for each department. A suitable grouping of depart- 
ment headings upon this record into: 


(a) Production departments or production centers, 
(b) Non-productive departments (mechanical), 
(c) Non-productive departments (administrative), 


will be helpful in arriving at bases for proration of indirect manufacturing expense, as. 
explained on page 6 of this section. 





Section 4 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 6 FOURTH EDITION 





“DEPARTMENTALIZATION NECESSARY FOR PROPER 
DISTRIBUTION OF FACTORY OVERHEAD” 


“The first step in a fair and equable distribution of factory overhead is a departmental- 
ization of the business. Every business can be departmentalized to some extent, some 
more than others, but the subdivision into departments varies so much in the different 
lines that it is almost impossible to give any definite idea as to what divisions should be 
made. Generally speaking, it is best to subdivide into departments according to opera- 
tions of manufacture, although at times, for simplicity, a subdivision which places 
similar work in the same department regardless of operation is used and has proven 
satisfactory in a number of cases. By similar work is meant hand workers who use 
practically the same amount of supplies, machines of similar type, etc. Departmental- 
izing by operations is a little more complicated, as it results in a greater number of 
departments, because the same or a similar kind of hand work may be done in several 
departments, and the same holds true of the machine departments.’’* 


Nearly every manufacturing establishment can be divided into two general classes of departments: 


(a) ‘‘Production departments”’ or “‘production centers,” 1.e., those which make goods 
for sale, such as contributing or process departments and assembling or 
completing departments. 


(b) ‘‘Non-productive departments,”’ i.e., mechanical and administrative depart- 
ments, which do not make goods for sale. 


Furthermore, the overhead expenses of most manufacturing concerns can be divided into two 
classes: 
(a) Expense which is incurred exclusively for account of one department and is, 
therefore, chargeable directly to that department. 


(b) Expense incurred jointly, account of several departments, which must be assessed 
against those departments upon a pro-rata basis. 


After ascertaining the amount of expense chargeable to each non-productive department, direct 
and upon pro-rata bases, this amount should be apportioned, upon predetermined bases, to the 
productive departments interested.. 


In arriving at bases for pro-rating expenses incurred jointly for account of several departments, 
and for apportioning expenses of non-productive departments, the character of the service ren- 
dered and its relation to the departments served must be considered; ‘‘not all overhead expense 
bears down with equal pressure on all productive centers.” 


*Quoted from bulletin issued by the Federal Trade Commission, 





Standard Accounting and Cost System—Electrical Manufacturing Industry Section 4 
FOURTH EDITION Page T° 





The following examples, extracted from the Federal Trade Commission’s bulletin, will serve to 
illustrate the points to be considered in arriving at proper bases for apportioning expenses. 


1. Building expense 

“The first requisite of a business is a place in which to work; consequently, the first item 
of overhead is building expense or rent. If the building is owned by the manufacturer, 
the building expenses consist of insurance, taxes, depreciation, and repairs, together 
with such other expenses which are general in their nature but yet are necessary to 
render the building useful, such as heat, light, elevator, janitor, and water. Ifthe build- 
ing is rented, the items of insurance, taxes, depreciation, and repairs are paid by the 
owner and in lieu of theseisrent. Rent includes a return on the investment in addition 
to the items named, so when it is desired to make comparisons between plants where the 
building is owned and where it is rented the return on the investment must be taken 
into consideration.” 

‘The basis of distribution for all rent charges is the productive or used square feet. The 
total used square feet divided into the total rent charges gives the charge per used 
square foot. This result multiplied by the used area of the departments gives that 
department’s proportion of the total rent expenses. By used floor space is meant that 
which is actually in use, exclusive of stairways, passages, elevator space, and idle or 
unused space.” 


2. Power 


“The second requisite is power, and this must be obtained either from outside sources 
or generated in one’s own plant. The distribution of power is a little more difficult than 
that of building expense and sometimes an arbitrary division based on the opinion of 
the engineer and superintendent is used, but this method is not recommended. One 
difficulty in distributing power charges is that very often the same boiler supplies steam 
for heating and steam for power generating and it is difficult to say how much for each.”’ 
“For distributing power charges the factor generally used is found by multiplying the 
horse power required by each machine or department by the average hours run by each 
and dividing the sum into the total power charge. Power distribution is a problem in 
itself, and it varies so much in different plants that it is impossible to lay down any rules 
for its solution. Each plant must be treated in an individual manner according to the 
existing conditions.”’ 


3. Insurance and taxes 

“Insurance and taxes should be distributed on the basis of the actual net value of the 
equipment in each department. This refers to fire insurance and taxes on the plant only, 
as boiler insurance is a charge to power, accident insurance is a charge to general factory 
expense, and the charge for other forms of insurance is determined by the nature of 
the insurance. Taxes on real estate and plant*only are chargeable against manufacturing 
operations, as taxes on finished goods in stock and franchise taxes are chargeable to 
general expense, while income tax is a direct charge to surplus.” 


*This is intended to embrace all personal property at manufacturing plants. 





Section 4 Standard Accounting and Cost System—Electrical Manufacturing Indusiry 
Page 8 FOURTH EDITION 





4. Work in progress record 


This is a record kept entirely by production order numbers and it is its purpose to collect 
for each production order all the elements of cost chargeable against it, in accordance 
with the procedure outlined on page 10 of this section. 


5. Development and complaint record 


The purpose of this record is to collect all expenditures, for development, patterns, 
tools and complaints as outlined in Section 2, subdivision A, and allocate them to: 


Individual orders (Development, pattern, tool or complaint order through job 
numbers). 


Classes of articles, or apparatus. 
The cost of each individual order is assembled on a “‘cost sheet’”’ or job record. 


A summary is suggested that will collect under classes of articles, or apparatus, the 
aggregate charges to individual development orders. Liquidations, as explained on 
page 14, should be entered on the summary. This record will then show the unliquidated 
balance for each class of article, or apparatus. 


6. Manufacturing plant and depreciation record 


The purpose of the manufacturing plant sub-ledger is to collect the aggregate charges 
from the individual manufacturing plant account orders. Charges to each manufactur- 
ing plant account are shown separately. 


If the manufacturing plant orders are preceded by formal appropriations, it is desirable 
to collect, by plant accounts, the expenditures against each appropriation. The essential 
feature of the appropriation record is to show when the appropriation has been exhausted. 


As a basis for the intelligent application of depreciation in costs, a record should be 
established which will show the first cost, yearly additions and life of each building and 
of each large machine tool or other equipment, separately or by accounts (Section 3, 
page 2). Charges to each manufacturing plant account should be arranged by depart- 
ments. 


This record should also show the normal depreciation, at rates shown in Section 2, 
page 11, deducted from the cost of manufacturing plant equipment, separately or by 
accounts. 





Standard Accounting and Cost System—Electrical Manufacturing Industry Section 4 


FOURTH EDITION PageS | 
- 





Methods of determining depreciation 


“One method of handling depreciation, which is unqualifiedly condemned although 
extensively used, is to wait until the end of the year and then if the profit and loss 
statement shows that a good profit has been earned to charge a part of this profit to 
depreciation. If, on the other hand, the profit and loss shows little or no profit, nothing 
is charged to depreciation. It is difficult to understand how any practical man can take 
the view that his plant and equipment have not worn out because he has not made a 
profit, and at the same time have worn out when he has made a profit.”’ 


“The first step necessary to provide for proper depreciation is to departmentalize the 
plant values. The next step is to take each kind of equipment or machine and figure 
its proper depreciation.’’* 


The Committee recommends the adoption of the rates as shown in Appendix A, Section 2, page 11: 


Depreciation on new plant and facilities should start as soon as they are completed and 
ready for use. 


Method of including depreciation in costs 


The total amount of normal depreciation to be absorbed in shop cost during the year is deter- 
mined at the beginning of the year. Each month an entry should be made for the monthly 
proportion, crediting account No. 23 and charging accounts Nos. 324 and 384. 


7. General expense record 


The purpose of this record is to summarize the expenditures of the distribution and 
general administration departments, as outlined in Section 2, subdivision D, and 
allocate such expenditures, first, to accounts, as defined in Section 3, page 21, under the 
caption ‘‘General expenses”’ and, second, to individual distribution and administra- 
tion departments. (Forms of the same general description as described under “‘ Indirect 
manufacturing expense records’”’ may be used.) 


* Quoted from bulletin issued by the Federal Trade Commission, 





Section 4 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 10 FOURTH EDITION | 


5. METHOD OF RECORDING DETAILS IN SUB-LEDGERS 
AND UPON INDIVIDUAL JOB COST SHEETS 


A. SOURCES OF ENTRY FOR SHOP COST 


Charges against the several classes or orders, described in connection with the shop order system, 
including charges account of ‘‘production orders,’’ which will be recorded upon the individual 
‘“‘Job cost sheets’’ supporting the ‘‘ Work in progress”’ sub-ledger, will originate, as follows: 


1. Material 


When a general stores system is maintained, as materials and supplies are received into 
the storeroom, the cost of them, including transportation, will be charged in the sub- 
ledger to ‘Factory raw materials and supplies’’ account and, as they are required by 
shop departments, they will be withdrawn from the storeroom by means of ‘‘material 
requisitions.’’ These requisitions must show the quantity, description and value of the 
material withdrawn and the number of the order for which it is to be used. Charges 
to the orders will be entered direct from “material requisitions.” 


When it is the practice to order materials for the exclusive use of a specific department 
or upon a specific order, it may not be deemed necessary to pass the transaction through 
the storeroom records, therefore a “‘material requisition” is not necessary. The source 
of entry for such material will be the vendor’s invoice, which should indicate the order 
number for which the material was purchased. 


2. Labor 


All charges against orders for labor performed in the shops will originate with the time 
ticket (or labor ticket), which must show the number of the order chargeable; also check 
number of operator, article, description of operation, number of hours and rate of wages 
and the total amount of the charge including premiums paid for overtime or quantity 
production. 


3. Indirect expense 


Having recorded all details in the sub-ledgers, there should be entered upon the ‘‘job 
cost sheets” the assessments against the corresponding ‘‘production orders”’ for ‘‘in- 
direct manufacturing expense’ including “‘depreciation,’”’ thus obtaining the “‘shop 


cost’”’ of these orders. 


Standard Accounting and Cost System—Electrical Manufacturing Industry Section 4 
FOURTH EDITION Page 11 





6. ABSORPTION OF INDIRECT MANUFACTURING EXPENSES 


Each production center or department should be charged with all expense which can be definitely 
traced to it. In addition, it must be charged with its proper share of any expense incurred jointly 
with other centers or departments. 


“These expenses, while part of the cost of a job, are general, so can not reach the job 
direct; hence a method must be devised for them to reach the cost sheet in an indirect 
manner, the method at the same time being so planned that each job will receive its 
fair proportion of the total.’’* 


There are several methods of absorbing these expenses into costs. Those most commonly used are: 


a. “Percentage on direct labor’’ method 


Basis: Percentage relation of the normal total indirect manufacturing expense to the normal 
total direct labor of a production center or department. 


This method is sufficiently accurate, when employees doing the same class of work, earn nearly 
uniform wages per hour and use equipment of substantially the same size and character. It fails 
to take into account, however, the great variations, when they exist, in such items as the value 
of equipment employed, the expense of supervision over different classes of employees (those 
earning low rates of pay often requiring the more costly supervision), the quantity of power required 
to operate equipment, etc. 


b. ‘‘Productive man-hour rate’? method 


Basis: Normal total indirect manufacturing expense allocated pro-rata, the normal total pro- 
ductive man-hours of a production center or department. 

This method avoids the variations due to the different earning capacities of employees, which is 
an inherent weakness of the “percentage on direct labor’? method, but does not take into con- 
sideration the variations in value of equipment, expense of supervision, quantity of power re- 
quired, etc. 


c. “Machine-hour rate’’ method 


Basis: Normal indirect manufacturing expense allocated to individual machine tools, or groups 
of them, divided by the normal total number of hours the machine tool or tools operate during a 
year. 

This method produces more accurate results for certain classes of product, but requires some- 
what greater refinement in the distribution of expenses to production centers and incurs some- 
what larger clerical expense. 


d. “Application on material” method | 


Expenses which relate primarily to material, are as a rule, subordinate and of secondary impor- 
tance to those relating to manufacturing operations as a whole. Moreover, the fluctuations in 
the prices of material are, over a cycle of years, so much greater and more frequent than those in 
the rates of labor, that material furnishes a less stable and, therefore, a less dependable basis 
upon which to allocate indirect expense. Better results are obtained if the amount of loading 


* Quoted from bulletin issued by the Federal Trade Commission, 


Section 4 Standard Accounting and Cost System—Hlectrical Manufacturing Industry 
Page 12 FOURTH EDITION 





absorbed is determined on the basis of productive labor, tonnage or other units. There are some 
instances where the value of material might prove to be a more logical basis, for example: (1) 
material bought for resale, on which little or no direct labor is performed, and (2) material for 
manufacturing, where the direct labor performed is so small or variable that if direct labor was 
used as a basis, incorrect results would be obtained. In these cases, expense may be applied as 
overhead directly to the material, especially, such expense as purchasing, transportation, demur- 
rage, receiving, storing and handling. In such cases, the expense should be absorbed on the basis 
of volume, units, weights or value of material, whichever is found to be the more equitable. 
Value should not be used when many different kinds of material, widely different in cost per unit, 
are purchased. 


here are cases where the direct labor involved is so small, in relation to the material, that it is 
obvious that the expense of handling the material alone would exceed the total overhead expense 
absorbed by the plan of applying overhead to productive labor as a base. In these cases it may 
be advisable to apply part of the overhead burden against the direct labor on the job and the bal- 
ance based on some unit of the material as suggested above. When burden is applied both on 
direct labor and on units of material, the amount absorbed on the basis of material, of course, 
should be credited to the expense accounts from which derived in order to avoid over-absorption 
by duplication of amounts included in costs. 


The conditions of production in the electrical industry vary so greatly that no one method of 
applving indirect manufacturing expense can be consistently recommended for universal use. 
The “‘percentage on direct labor’’ method appears to give the most satisfactory results over the 
widest field, with minimum clerical labor. Under some conditions, however, and for some classes 
of product, either the ‘‘machine-hour rate’’ method, the “‘ productive man-hour rate”’ method or 
the “application on material’? method insures somewhat greater accuracy. Since it is to the 
interest of all manufacturers to make their costs as accurate and complete as practicable, a care- 
ful study of the various methods is advocated, so that the method which will give accuracy for a 
particular class of product, under existing local conditions, will be used in determining the cost 
of that product. 


USE OF NORMAL OR AVERAGE RATES OF INDIRECT 
MANUFACTURING EXPENSES IN COSTS 
The use of normal or average rates of indirect manufacturing expenses in costs is recommended, 


to avoid violent cost fluctuations, during periods of subnormal or abnormal production. See 
Section 2, pages 7 and 8. 


Standard Accounting and Cost System—Electrical Manufacturing Industry Section 4 
FOURTH EDITION Page 13 





7. SOURCES OF ENTRY FOR MANUFACTURING COST 


Thert must now be added to the “shop cost’’ (see chart, Section 2, page 1) of the production 
orders, “development cost” and “‘installation and construction”’ costs, thereby obtaining the 
‘““manufacturing cost’’ of these orders. 


Although charges against ‘‘ production orders,” “‘manufacturing plant orders,” ‘‘expense orders.’ 
and ‘“‘development and complaint orders’’ will originate from “material requisitions,”’ 
vendors’ invoices and “‘labor tickets,” charges to ‘“‘development and complaint orders,”’ in addi- 
tion to those originating from these sources, will also originate from the following: 


(a) Time cards of engineers and draftsmen for time traceable to individial develop- 
ment orders. 


(b) Journal entries for pro-rata liquidation of purchase price of patents. 


(c) Invoices covering royalties under license agreements. 


1. Development and complaints 


The liquidation of cost of development, patterns, tools and complaints into manu- 
facturing cost should be as follows: 


(a) Expenditures incurred in the development of special product designed for 
specific customers’ orders, should be included, as a separate item, in 
the manufacturing cost of such product. 


(b) Expenditures incurred in the development of standard types of product, 
should be included in the manufacturing cost of all such types pro- 
duced, special as well as standard, on pro-rata bases to be determined 
according to the estimated value or volume of output during a 
reasonable period of time. 


(c) Expenditures incurred in the development of entirely new classes, lines 
or types of product, the manufacture of which has been abandoned, 
should not enter into manufacturing costs, but should be charged 
to account No. 25-c. “Reserve for development and complaints,”’ 
if such product is not special as defined in paragraph (a). 


2. Installation and construction 


Those concerns which make it a practice to enter into contracts for the sale of apparatus, 
which include its installation upon the customer’s premises, should so arrange their 
‘“‘job cost sheets,’’ that the cost of the installation work may be recorded thereon, as 
expenditures are incurred. 





——e lho 


Section 4 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 14 FOURTH EDITION 


8. ABSORPTION OF-GENERAL EXPENSES 


If the cost sheets are to show the full ‘‘cost”’ (see chart, Section 2, page 1) of the products, there 
must be added to “manufacturing cost,’ upon predetermined basis or bases, ‘distribution 


expense,” ‘‘general administration expense’’ and ‘‘non-departmental expense.”’ 


In accordance with paragraph 7, page 9, of this section, the distribution and administration 
expenses will be recorded by individual distribution and administrative departments. The 
aggregate of these expenses may be pro-rated over “‘manufacturing costs,’’ upon a “percentage 
on shop cost”’ basis, or special consideration may be given to the relation which certain classes of 
expenses bear to the various classes of product, for example: 


1. Taxes on income may be pro-rated with regard to the profits accruing from each class of 
product. 


2. Patent litigation expense, to the costs of the products to which it relates. 


3. Pension and retirement payments, to the products in connection with which the individuals 
had been employed, or, more properly, pro-rata against all products upon basis of total 
labor. 


4. Losses on customers’ accounts may be pro-rated by adding a percentage to ‘“‘manufacturing 
cost,’ representing the average relation of the aggregate losses for a period of several 
years to the aggregate manufacturing costs for corresponding period. 


Losses on warehouse stocks may be pro-rated in a similar manner, or a separate percentage 
may be determined for each class of product. 


wn 


Standard Accounting and Cost System—Electrical Manufacturing Industry Section 4 
FOURTH EDITION Page 15 





9. PROPER ACCOUNTING FOR DISPOSITION OF PLANT SCRAPPED OR SOLD 


As all rates of depreciation are average rates, and apply to the classes of plant items as a whole, 
it is probable that they do not exactly apply to any particular item in that class. Therefore, it 
follows that in case an item is sold at a higher or lower value than the difference between the 
initial cost value, and the depreciation reserve obtained by applying an average rate for the 
class, the profit or loss should be credited or charged to the depreciation reserve and not to surplus. 


The accounting would be as follows: 


Forexample: Take the case of a machine costing $5000 replaced by a machine costing $6000. 











Depreciationmreserve of 7199 per yearforsix years... 4. ieee le ens $2250 
INR GCICLOEN VAIUC tot. ef ceaet Ah APOIO Piao we Peles, Pally be ala ghee de ey $2750 
BENG diacoine aiter Six VEaTs’ USG1s:SOMUION 0 eg as os wk ed a cee Oe dawg aie $2000 
ree CRS TM DS MNEs ee Viiecc 2) 2 en te Ce See te tha 25 Se ao yaa. a8 y) Sin «hd $750 
Entries 
MEP PE NI GCRINCEY . oy.06 coc a die 0 os Cele $6000 
Cr. Accounts payable............$6000 
Cost of replacing machinery 
Pate ccounts receivable... 06.54. $2000 
CPA AC REIOL oan oa ot os. ee $2000 
Sales value of the old machine 
3. Dr. Depreciation reserve........... $750 
; Cre MACHINeTVeu. tear cs aueiy t $750 
Loss on sale of machine 
4. Dr. Depreciation reserve........... $2250 


Cri Machinery patents aciciec eine $2250 
Cancelling the depreciation reserve applying against machine sold. 


Section 4 | | 


Page 16 


Standard Accounting and Cost System—Electrical Manufacturing Industry 


FOURTH EDITION 





1908 Expenditures (25%) 


1909 
1910 
1911 


Book value January 1, 1912 


ce 


ce 


sé 


1912 Expend 


1913 
1914 
1915 
1916 
1917 


ee 


.$10,000 »: 
(50%) 16,000: 
(75%) 15,000 
(100%) 30,000 

$71,000 
itures (100%) 25,000 
ss 40,000 
cs 28,000 
- 60,000 
* 72,000 
x 80,000 
$376,000 


EXAMPLE FOR SETTING UP DEPRECIATION ON SEMI-DURABLE TOOLS 


1912 Depreciation $30,500 


1913) 26,750 
1914 ra 28,750 
1915 é 30,750 
1916 rf 38,250 
1917 4 50,000 

$205,000 


Notre.—First four years’ expenditures represent that portion of years’ expenditures to be depreci- 
ated, assuming balance to have been written off. 


(257) 


Amount for depreciation made up as follows: 


1912 1913 
1908 Expenditures $10,000 
1909 : 8,000 $8,000 
1910 S 5,000 5,000 
1911 - 7,500 7,500 
1912 ¥ 6,250 
1913 ce 
1914 fe 
1915 4 
1916 i 
$30,500 $26,750 


1914 


$5,000 
7,500 
6,250 
10,000 


$28,750 


1915 


$7,500 
6,250 
10,000 
7,000 


$30,750 


1916 1917 
$6,250 

10,000 $10,000 

7,000 7,000 

15,000 15,000 

18,000 

$38,250 $50,000 


(FOURTH EDITION) 


STANDARD ACCOUNTING AND COST SYSTEM 
FOR THE 


ELECTRICAL MANUFACTURING INDUSTRY 


Section 5 


SUGGESTED SCRAP ACCOUNTING SYSTEM 


a dics siphin Tet 
MAM JLAOLAR GIA: 
ve a 





Standard Accounting and Cost System—Electrical Manufacturing Industry Section 5 


FOURTH EDITION 


Page 1 





SUGGESTED SCRAP ACCOUNTING SYSTEM 


1. KINDS OF SCRAP AND DEFINITION 


A. 


Waste from manufacturing processes or natural scrap 
Raw material, which remains after manufacturing process, the form of which has been 
changed so that it can be disposed of only for its intrinsic value. 


Parts scrapped while in process of manufacture 

Partly finished parts found defective or spoiled after one or more manufacturing opera- 
tions have been performed thereon. 

Finished parts scrapped during assembly operations 


Parts which have passed inspection and have reached the storeroom or production 
centers and where they are found defective while assembling. 


Finished and assembled parts scrapped from storerooms 

These are the items which are scrapped for the following reasons: 

a. Overstock—Parts for which there is no demand. 

b. Obsolete—Parts which cannot be used due to change in design. 


Purchased material which does not meet requirements. 

As a rule costs should not be affected by purchased materials found defective before the 
first manufacturing operation is performed. The vendor should be charged with the loss 
arising from this source or the material returned to vendor for credit. 


z. ABSORBING MANUFACTURING SCRAP LOSSES IN COSTS 


A. 


Scrap ticket 


a. Scrap tickets shall be made out for all scrap and should provide for the separation 
of the cost of material, labor and expense. 
Different colored forms may be used to designate the various kinds of scrap (See 1-A 
to E) 


b. The scrap ticket should at least show: 
Order number 
Quantity and description (Part or other identifying number) 
Operation number on which defectives were scrapped 
Last operation number 
Cause of defect (Symbols can be advantageously used to indicate nature of defect, 
i.e., whether material is defective, due to defective workmanship or design) 
Department responsible | 
Cost value of part or material scrapped. 
Weight and kind of scrap (i.e., iron, steel, brass, copper, etc.) 
Value of scrap. 
Total loss. 





Section 5 
Page 2 


Standard Accounting and Cost System—Electrical Manufacturing Industry 
FOURTH EDITION 


The scrap tickets are priced at the estimated market price of scrap less average 
cost of collecting, preparing and disposing of the scrap, the latter item being pro- 
vided for by establishing a standard rate per pound to be applied to the pounds 
of scrap produced. 


A copy of the scrap ticket is sent to the Cost department for use in computing costs. 


Copies should be furnished to Planning, Salvage and other interested departments. 


B. Waste from manufacturing processes (See 1-A) 


a. 


A recognized practice is to charge the shop order with the cost of raw material drawn 
from storerooms and to credit the shop order with estimated net value of waste 
produced. 


The value of waste produced may be obtained by the use of one of the following 
three methods. The ‘‘A”’ or ‘“‘B”’ method is considered preferable. 


““A’’ Method: 


Where it is practicable to keep the waste separated by orders, scrap tickets should be 
used as outlined in 2-A and 2-B-a. 


““B’’ Method: 


Determine the estimated quantity of waste from each part or unit based on actual 
tests made by calculating the gross and net weight of each part or unit. The 
difference in weight should be weight of scrap. 


“C” Method: 


The value of scrap may be calculated upon a percentage basis representing the ratio 
of natural waste to the total value of each kind of material or line of product. For 
this method the scrap ticket will enable the Cost Department to summarize scrap 
received according to departments or lines of product. The value of raw material by 
kinds or lines of product may be determined from material eee as or Cost Depart- 


+. ment: -records of-material used. 


C. Parts scrapped while in process of manufacture (See 1-B) 


This item is included in the cost by charging the remaining good parts with the cost of 
the defectives up to, and including, the operation on which the parts were scrapped, less 
the scrap value of the parts scrapped. 


Standard Accounting and Cost System—Electricak Manufacturing: Industry - Section 5 
FOURTH EDITION . Page 3 





D. Finished parts scrapped during.assembly operations (See 1-C) 


Scrap tickets are filed according to order numbers; these forms being priced and 
extended to show the cost of parts scrapped less the scrap value. _ The net loss then 
can be charged direct to the specific customer’s order or to various lines of product. 


E. Finished and assembled parts scrapped from storerooms (See 1-D) 
a. Parts scrapped as the result of overstock (See 1-D-a) 


The loss on these parts’ as shown by the scrap‘tickets may be charged against the 
specific customer’s order or included as one of the elements to be provided for by the 
standard rate for overhead to be applied to various lines of product. 


b. Parts scrapped as the result of charge in design (See 1-D-b) 


The loss on these parts as shown by the scrap tickets should be charged to ‘‘ Develop- 
ment and complaints” account, and totally liquidated into manufacturing cost 
monthly, as such items can in no sense be considered a “‘ Deferred asset.”’ 


F. The total amount of scrap loss included in any customer’s order or in the cost of a part 
manufactured for stock orders may be obtained by assorting scrap tickets by order and 
part numbers. The loss may be further subdivided to show cause of loss and depart- 
ments responsible; also comparison may be made with predetermined standards, to 
determine if losses are excessive and the reasons therefor. 


3. SCRAP ACCOUNT 


The ideal method of accounting for scrap is to establish a department with a complete 
set of operating accounts. When this is not practicable, the best substitute is to open a 
scrap account, debited and credited as follows: 


A. Debits 


a. Scrap value of parts scrapped (See 1-B, 1-C and 1-D) reported by scrap tickets. 


This scrap value to be credited to the accounts to which the cost of the parts were - 
charged. 


b. Scrap value of natural scrap (See 1-A) reported on scrap tickets. 


This scrap value to be credited to the accounts to which the cost of the material was 
charged. 





Section 5 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 4 FOURTH EDITION 





c. All labor used in collecting, preparing and disposing of scrap. 


d. Pro-rata share of overhead expense, such as salaries and wages of other than labor- 
ers, and also expenditures for miscellaneous small tools and supplies. 


B. Credits 


a. Salvage value of scrap transferred to stock or other departments, debited to orders 
departments or lines of product, at fair values. 


b. Value of scrap sold to outside concerns. 


C. The balance in the scrap account, after deducting inventory value of scrap on hand, 
should be transferred to the reserve for factory inventories. (See Account No. 25-a, 
Section 3, page 18.) 









ug q ra! a AA 
‘ee WA 






yen 


STANDARD ACCOUNTING AND COST SYSTEM 


FOR THE i 
ELECTRICAL MANUFACTURING INDUSTRY ; 


Section 6 


SUGGESTED FOUNDRY ACCOUNTING SYSTEM 





Ret sy, 





et PAST de Th oy Ae Orateaa Ba uti | 





at’ 


Ta 


“Att mot 









’ 
i t 
y i 
A } 
wih, 
ay \ ‘ t 
aK n 
ii ; f 
ines" 6 
-) 
, ‘ 
Ae reat 4 ‘ ' a) “ ; it : : ; 
: ‘ ‘ : 4 : ~ : 
a ys ; 4 
© gotivee 
‘ : 7 
‘ 
ai 9 . : 
a 4 ae 
ity i 


care \ a rath ane 


| ae 4 : | ; i y Mi fa ah ke a | ‘ i whe 
ee wh MRTAYS OVUTNUOIOA xaqnvos ;aaTeKoove cay: 





Standard Accounting and Cost System—Electrical Manufacturing Industry Section 6 
FOURTH EDITION Page 1 





FOUNDRY ACCOUNTING SYSTEM 
1. Preliminary 
The object of the foundry accounting and cost system outlined herein is: 


(a) To place foundries upon a uniform basis of accounting and cost determination, with 
clear definitions of terms and titles, so that cost statements and statistical 
reports may be correctly compiled and advantageously compared. 


(b) To permit the closer study of results, and the possible reduction of prime costs and 
indirect expenses. 


(c) To obtain so far as may be practicable and desirable, differentiated costs according 
to classes of product, and costs of zndividual castings. 


While the system outlined has been arranged primarily for iron foundries producing castings of 
varied designs and of wide weight range, the underlying principles upon which it is based can be 
applied to brass, malleable and steel foundries by changing the terminology and altering the 
arrangement of the cost details to suit conditions prevailing therein. The more important con- 
ditions prevailing in brass, malleable and steel foundries which will need to be given special 
treatment are referred to on page 10 of this section. 


Determining the unit costs of castings by classes of castings similar in weight and design, or, by 
individual pattern numbers, and using such unit costs for crediting the foundry for the good 
castings shipped therefrom, cannot be too strongly urged, for the reason that inaccuracies are 
bound to occur if castings of widely varying designs and weight range are grouped and costed 
at an average rate per pound. 


The direct labor cost of castings-molding, coremaking and cleaning can be applied to costs 
of classes and individual castings with reasonable accuracy, but the overhead expense portion 
of the total cost of output is not so easily allocated. 


The two methods commonly used for the absorption of the foundry overhead are the “‘ percentage- 
on-direct-labor” and “‘rate-per-pound.”’ The basis of the ‘‘ percentage-on-direct-labor”’ method 
is the percentage relation of the normal total overhead expense to the normal total direct labor; 
the “‘rate-per-pound”’ is the quotient resulting from dividing the normal total overhead expense 
by the normal total weight of output. 





Section 6 Standard Accounting and Cost System——Electrical Manufacturing Industry 
Page 2 FOURTH EDITION 


A careful analysis of the foundry overhead expense has shown that a number of the items of 
expense are closely related to the weight of castings produced, while others bear closer relation 
to direct labor. Therefore, by differentiating between the two relations, this system will give 
greater cost accuracy. 


If it should be desired to use the ‘‘machine-hour-rate’’ method for absorbing overhead expense that 
method can be readily introduced under this system. However, where the ‘‘machine-hour-rate”’ 
method is adopted, it is recommended that a portion of the overhead expense be applied to the 
cost of castings on the basis of weight. 


It is recommended that the foundry be credited with the cost of output, as it is shipped throughout 
the month, at xormal class rates per pound, or normal cost of individual castings, based upon the 
cumulative cost for a reasonable period of production. Using cumulative costs will eliminate the 
fluctuations due to inclusion of foundry charges in one month which are really a part of the cost 
of previous or subsequent months’ production. 


2. CLASSIFICATION OF PRODUCT 


Castings are to be carefully classified for two main reasons: 


(a) To aid in the closer determination of costs, thus approaching, as nearly as possible, 
the ideal of individual costs on each pattern. 


(b) To facilitate the comparison of results on similar work, or equally simple or complex 
product. 


The controlling elements in making the classification are, therefore: 


(c) The element of complexity, delicacy, liability to defects, etc. 
(d) The element of weight. 
Revision and corrections, especially as to weights, should be made promptly as required. 


Every order to make castings should be immediately classified, and the proper symbols entered 
on the casting order. 


3. NEW PATTERNS 


In order to classify in advance of production, a careful, temporary estimate of weight should be 
made. Immediately after production, this estimate must be verified or corrected. 





7 


Standard Accounting and Cost System—Electrical Manufacturing Industry Section 6 
FOURTH EDITION Page 3 





4. DEFINITIONS OF ELEMENTS OF COST 
Prime cost—Consists of: 


(a) Productive material: 
That which reappears in the finished product: 
Pig iron 
Scrap iron 
Ferrous metals 


(b) Direct labor: 


That tending directly to produce and complete iron castings, the effect of 
which is more or less apparent in the completed product, provided such labor 
may be traced specifically and directly, without arbitrary pro-rating, to casting 
orders or to the following general functions: 


Melting labor 
Molding labor 
Core labor 
Cleaning labor 


Indirect expense—Consists of: 


Those disbursements which contribute to, and are necessary in connection with the 
production of good castings, but which are hardly manifest in the finished article; or, 
are not performed directly and clearly thereupon in such manner as to permit definite 
allocation of time or material without arbitrary pro-rating; or, are consumed in process 
of production, such as flux material, power, fuel, facing, chaplets, etc.; also of expendi- 
tures for maintenance of the property invested in the foundry; and for small tools and 
supplies, worn out in course of foundry operations; also insurance, and taxes, and de- 
preciation of buildings and equipment; also a portion of the general administration and 
service departments, such as factory offices, stores, transportation and maintenance 
departments. 


5. MOLTEN METAL COST 
Method of determining cost per pound of metal at the spout (ladle): 


Ascertain total melting cost which consists of productive material, and direct labor and 
indirect expenses of the Melting department as defined under ‘“‘definitions of elements 
of cost.” Divide such total cost by the weight of all metal accounted for, i.e., total metal 
put into the cupola less melting loss (shrinkage). (Foundry scrap used should be priced 
at the same rate per ton as will subsequently be used in crediting the weight of scrap 
produced, unless foundry scrap is carried in an inventory account, in which case it 
should be valued at cost.) 





Section 6 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 4 FOURTH EDITION 


Method of determining cost per pound of molten metal: 


Take the total melting cost, deduct the market value of foundry scrap (gates, heads, 
etc.), and defective castings produced and divide the net cost by the weight of good 
castings. 


Note: When gates, heads, risers, overmelt, sprues, droppings, skulls, test castings, 
etc., are not actually weighed, the weight of such foundry accumulations 
may be determined by a reasonable number of actual tests of the weight 
of metal poured to determine the percentage of melting loss (shrinkage) to 
the weight of all metal put into the cupola. Deducting the aggregate weight 
of good castings, foundry equipment cast, defective castings in the foundry 
and melting loss (expressed in weight) as determined above from the total 
weight of all metal put into the cupola will give the estimated weight of 
gates, heads, etc. 


Method of differentiating molten metal costs: 


Add to the weight of good castings in each class of product (or individual casting) the 
weight of gates and heads in such class, then add the weight of defective castings in each 
class, and, finally absorb, over each class the weight of all other foundry accumulations, 
such as overmelt, droppings, sprues, etc., which cannot be allocated direct to classes or 
individual pattern numbers, in the proportion that the weight of good castings in such 
class bears to the total weight of all good castings. 


In order to apply the above melting cost differential the weight of gates and heads appli- 
cable to the various classes of castings may be determined by taking test weights on all 
patterns, that is, weigh enough gates and heads on each pattern to obtain a reasonable 
average weight revising as often as necessary. 


Multiply the gross weight in each class by the ‘“‘cost per pound of metal at the spout”’ 
and credit with the weight of scrap produced at the scrap value per pound. 


Result: The allocation of the depreciated value of scrap metals in the classes respon- 
sible for the unsalable tonnage. 


6. CLASSIFICATION OF INDIRECT EXPENSES 


(a) Classified according to functions of labor and nature of expenses. See separate 
series of definitions, Section 3, page 28. 


(b) Are further allocated, so far as possible, to the main departments of the foundry, 
as follows: 


& 
Standard Accounting and Cost System—Electrical Manufacturing Industry Section 6 
FOURTH EDITION ; Page 5 





Melting department: 


Including salaries of foremen and clerks in melting department, fuel used in cupola, 
flux material and other miscellaneous supplies, repairs and renewals of small tools, 
foundry laboratory expense, maintenance of cupolas, charging floor, cupola cranes and 
elevators; also Melting department’s share of maintenance of buildings and equipment, 
power, heat and light, insurance, taxes, depreciation, general administration and service 
departments. 


Molding department: 


Including salaries of foremen and clerks in the Molding department, labor mixing sand, 
unallocated help rendered molders, setting molds, pouring, shaking out, cleaning up, 
handling patterns and flasks to and from storage, also expense material such as sand, 
facings, chaplets, etc., repairs and renewals of small tools, repairs, renewals and relining 
of ladles, repairs to patterns, loss on defective castings for which the Molding depart- 
ment is responsible; also Molding department’s share of power, heat and light, main- 
tenance of buildings, insurance, taxes, depreciation, general administration and service 
departments. 


Core department: 


Including salaries of foremen and clerks in the Core department, wages of oven tenders 
and core pilers, labor mixing and unloading core sand, fuel for core ovens, expense 
materials such as core sand, sea-coal, molasses, core and lubricating oils, core compound, 
flour, nails, iron rod, gaggers, arbors, etc., repairs and renewals of small tools and core 
boxes, loss on defective castings resulting from defective cores; also Core department’s 
share of power, heat and light, maintenance of buildings, insurance, taxes, depreciation, 
general administration and service departments. 


Cleaning department: 


Including salaries of foremen and clerks of the Cleaning department, expense materials 
such as acids, sand blast materials, lubricating oils, etc., repairs and renewals of cleaning 
equipment, tumbling barrels, grinding wheels, pneumatic tools, brushes, knives, chisels, 
etc., operation and maintenance of cranes; also Cleaning department’s share of power, 
heat and light, maintenance of buildings, insurance, taxes, depreciation, general admin- 
istration and service departments. 





Section 6 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 6 FOURTH EDITION 





Non-divisible expense: 


Includes those items not specifically traceable to the foregoing departments, and these 
should be pro-rated to departments on bases as nearly exact as practicable. The bases 
suggested are: 


Non-departmental expense labor, in proportion to full time employees or total payroll. 


Non-departmental expense material, in proportion to expense material charges already 
allocated. 


Non-departmental power, heat and light, in proportions established by engineer. 
Insurance, value of floor space and equipment used. 

Taxes, value of floor space and equipment used. 

Depreciation, value of equipment by classes of equipment. 

General administration, in proportion to full time employees or total payroll. 


Stores and other service departments, in proportions established by stockkeeper and other 
heads of service departments. 


Annealing expense, all expenses of annealing are “‘indirect.’’ Each annealed class must 
bear such proportion of the total cost of annealing as its weight is to all the weight 
annealed. 


7. APPLICATION OF OVERHEAD TO CLASSES OF CASTINGS (or individual castings) 
Molding overhead—direct labor basis: 


Applies on molding direct labor of each class, or individual casting, in the form of a 
percentage representing the relation of the normal total indirect expense, as listed below, 
to such normal total direct molding labor. 


Salaries of molding foremen. 
Salaries of clerks in Molding department. 
Portion of the following expense assessed against the Molding department: 
Heat and light 
Maintenance of buildings and grounds 
Insurance and taxes on buildings 
Depreciation of buildings 
General administration 


Defective castings loss 





q 
h 


| Standard Accounting and Cost System—~-Electrical Manufacturing Industry Section 6 
FOURTH EDITION Page 7 





Molding overhead—weight basis: 


The following may be absorbed on the basis of weight of good castings, if there is not 
sufficient variation in classes and weights to materially affect the cost. 


Applied to weight of good castings in each class, or individual casting, at the rate per 
pound based on the relation of the normal total indirect expense, as listed below, to the 
normal weight of output. 


Molding expense materials; sand, soapstone, sawdust, molasses, flour, pitch, plumbago, 
sea-coal, charcoal, coke (other than used for melting), oils, parting, blacking, 
gulac, gasolene, nails, chaplets, etc. 


Operation and maintenance of handling equipment, electric trucks, industrial railway 
equipment, cranes, molding machines, sand cutters, etc. 


Repairs, renewals and relining of ladles. 


Power used for cranes, sand cutters, molding machines, etc., determined by permanent 
or temporary metering of horse power ratings. 


Wages of employees unloading, handling, cutting and mixing sand. 


Repairs and renewals of small hand tools, flasks, wheel-barrows, etc., used in the Mold- 
ing department. 


Repairs to patterns. 


All new patterns, including duplicate and replacements, are chargeable to 
“development and complaints’’ account. (See Section 2, page 4.) 


Labor handling patterns and flasks to and from storage. 


Also that portion of the following expense assessed against the Molding department: 
Insurance and taxes on Molding department equipment. : 


Depreciation on Molding department equipment. 


Core shop overhead : 


Total expense applied on core direct labor of each class, or individual casting, using cores 
in the form of a percentage representing the relation of the normal total indirect expense 
of the Core department to the normal total direct core labor. 


Cleaning expense: 


Total cleaning expense applied on cleaning direct labor of each class, or individual 
casting, cleaned, in the form of a percentage representing the relation of the normal total 
indirect expense of the cleaning department to the normal total direct cleaning labor. 


ts 





Section 6 Standard Accounting and Cost System—Electrical Manufacturing Industry 
Page 8 FOURTH EDITION 





8. COST PER POUND OF GOOD CASTINGS 


Divide the total weight of good castings for each class into the aggregate of the class 
cost of molten metal, molding, coremaking and cleaning direct labor and indirect 
expense. The result will be the full cost of castings per pound. 


9. DEFINITIONS OF STATISTICAL TERMS 


Good castings, or net output, consist of the rough weight after cleaning and removing 
gates, heads, risers, etc., of all goad castings poured during the period, including foundry 
equipment, which pass inspection and are not inherently defective. 


Metal at the spout, or gross output, is the total weight of all metal poured, that is, the 
weight of all metal put into the cupola less melting loss (shrinkage). The only use made 
of this figure, is to determine the cost of metal at the spout. 


Foundry scrap, consists of the miscellaneous and residual metal recovered in the foundry 
after each lot of castings has been put through all the foundry processes. It does not, 
however, include defective castings, whether such defects are discovered in the foundry 
or after delivery. It does include gates, heads, risers, overmelt, sprues, droppings, 
skulls, etc., also, castings used for foundry test purposes. 


Defective castings, are those which are inherently defective. They may be rejected 
before leaving the foundry or they may be sent out as apparently ‘‘good,” and be dis- 
covered, in the finishing processes, to be defective. 


Note: If castings are sent out really ‘‘good”’ but spoiled in other departments in which 
the castings are machined and assembled into completed apparatus or devices, 
the replacement should be entered as ‘‘good”’ product. 

Shrinkage, is the unaccounted for weight, as follows: 

(Principally) the melting loss. 
(In slight degree) the pouring loss. 


The loss in cleaning and finishing. 


10. FOUNDRY WEIGHTS 


Actual weights are to be taken at, or near the cupola, of each class of metal charged into 
the cupola. 


Standard Accounting and Cost System—Electrical Manufacturing Industry Section 6 
FOURTH EDITION Page 9 


Actual weights of all good castings to be taken in the Cleaning department, when ready 
for delivery. When lots of castings are made from one pattern at one time, weigh all if 
practicable, or take actual weights of several castings and apply average to whole order. 
Large castings should be weighed separately; small castings a number at a time. Card 
records of weights, according to pattern number, should be kept thoroughly up-to-date. 
Cards should be consulted and corrected after actual weights are secured on latest cast- 
ings made under each pattern number. 


Avoid estimates as much as possible. Plan for and secure reliable actual weights in 
every case where it may be done without serious delay. 


All inherently defective castings which were delivered from the foundry as “‘good”’ and 
subsequently returned, will be charged to ‘‘Scrap Inventory,” on the basis of the scrap 
value (market) of weight as returned. The net loss, which is the difference between the 
amount allowed and the scrap value, will be charged to foundry indirect expense, sub- 
distributed to the department responsible. 


Weights should be recorded promptly, especially at the end of period. At each report 
period care should be exercised to get complete weights and records, if at all possible, of 
results of all costs in the same period. 


11. MONTHLY STATEMENTS 
The following cumulative reports are suggested: 
Foundry disbursements: 


To show details and cost of productive material, expenditures for direct labor and out- 
lay for expense material and labor, classified by accounts (or related groups of accounts) 
and sub-distributed to the several foundry departments. Thus a foundry ‘‘depart- 
mental factor’’ or overhead percentage will be obtained and a closer determination of 
costs in each class will result. 


Class cost of castings (or individual castings) : 


Tabulating a series of built up costs, by classes, showing the amount of such class cost 
subdivided between: 


(a) Molten metal cost (net) and cost per pound. 

(b) Molding department—direct labor and cost per pound. 

(c) Molding department—indirect expense and cost per pound. 
(d) Core department—direct labor and cost per pound. 

(e) Core department—indirect expense and cost per pound. 

(f) Cleaning department—direct labor and cost per pound. 

(g) Cleaning department—indirect expense and cost per pound. 
(h) Annealing expense (if any) and cost per pound. 

(i) Total cost and cost per pound. 


This statement may also be issued in condensed form for the convenience of executive 
officers. 





Section 6 Standard Accounting and Cost System——Electrical Manufacturing Industry 
Page 10 FOURTH EDITION 





12. ADAPTING TO BRASS, MALLEABLE AND STEEL FOUNDRIES 


The more important special conditions, referred to on page 1 of this section, obtaining 
in brass, malleable iron and steel foundries, requiring treatment different than that 
recommended in the foregoing for iron foundries are: 


Brass foundries: 


In determining the cost of different mixtures, or alloys, proper allowance should be made 
for the variation in the serviceable life of crucibles (if used) and the quantity of fuel 
consumed per pound of alloy melted; these varying considerably for the various alloys; 
also the necessity for securing the correct weight of castings cannot be too strongly 
emphasized. 


Sprues, heads, gates, etc., from each alloy should be actually weighed and recorded for 
two important reasons: . 


(a) That the correct melting loss be determined. 


(b) That the scrap from the different alloys can be correctly valued. 


Malleable foundries: 


The annealing of malleable castings being a rather lengthy process, should be considered 
as additional direct labor as in paragraph “‘b,” page 3 of this section, under definition of 
cost. The accounting for the period’s production in that period’s business may there- 
fore, in some cases, be impractical. The same may be true of the “‘hard’”’ and “‘soft”’ 
cleaning costs, the former preceding and the latter following the annealing process. 
Under such conditions, the use of predetermined rates for these operations will be neces- 
sary. 


The most practicable method of including the cost of these special operations in the cost 
of castings is to determine average costs per dollar of direct labor, or per pound of rough 
casting weight, based on the quantity and cost of good castings having passed through 
these operations during the period. 


Steel foundries: 


As the annealing of steel castings involves conditions similar to the annealing of malle- 
able castings, the same accounting procedure should be followed in dealing with this 
item of cost as recommended for malleable castings. 


fie t 


can 





as 


i 
rey 
hi oe ie 


an 


- (il ie 





oh 


on 
Wind 


nt 














y 3 
7) * 
Hs) i 
x 
ws, 
e-Ty, 
4 
5 
i 


pe + ye 


en 


6 et ct sae ~ ae age 


a. 


Ine proms A 


"Y. 





a. 
° 
rey. 
f j 
) ees 
5 





Pressboard 


Makers 
Syracu 





